Waterloo, IA
- - - It's a trap many Americans fall into every day. Your car breaks down, or you receive an unexpected bill, and you are unable to find the available cash to pay the amount due. Luckily, there's a payday lender just around the corner, and the immediate cash is a quick fix to your looming problem.
The original purpose of a payday loan was for a one-time emergency situation. However, because many become trapped in the cycle of borrowing, the typical borrower pays back $793 for a $325 loan, according to a 2006 Center for Responsible Lending study. With lenders charging 390% - 780% Annual Percentage Rate (APR), it's easy for borrowers to fall into the pattern of repeat loans.
Veridian Credit Union offers an affordable alternative for consumers in need of cash. It's called a Payday Alternative Loan (PAL), and it offers a much more reasonable APR as low as 19%. Since Veridian began offering the loans in March 2007, the credit union has extended credit for almost 10,000 Payday Alternative Loans.
“Fees for payday lenders generally run between $15 and $30 per $100 borrowed, “ said Jean Trainor, President and CEO of Veridian. “Those large fees make it extremely difficult for someone to pay back a loan in a reasonable amount of time. The PAL is designed as an affordable alternative.”
A Veridian PAL offers a loan of up to $1,000 and a repayment term of up to six months. The most distinguishing factor of the PAL is that a savings account is also established as part of the process. When an individual requests a PAL, the amount requested is automatically doubled. For example, if an individual requests $500, the loan amount would be for $1,000. The additional $500 would be deposited into the borrower's savings account and held until the loan is paid in full. Both the repayment term and the savings component allow individuals to break the cycle of constantly renewing a loan.
“By including the savings component in the PAL, we are meeting the immediate needs of our borrowers, while helping them develop healthy savings habits,” said Trainor. “The savings account allows an individual to better plan for future expenses.”
To qualify for a loan, individuals must provide proof of income, such as a pay stub or account statement. Paychecks are required to be direct deposited to a Veridian account and there is a $20 application fee. Payments on the loan must be made every payday (weekly, biweekly, semi-monthly or monthly), and borrowers are encouraged to make their payments through automatic transfers. In fact, the interest rate is reduced from 21% APR to 19% APR if individuals choose to take advantage of automatic transfers.
To qualify for a loan, individuals must provide proof of income, such as a pay stub or account statement. Paychecks are required to be direct deposited to a Veridian account and there is a $20 application fee. Payments on the loan must be made every payday (weekly, biweekly, semi-monthly or monthly), and borrowers are encouraged to make their payments through automatic transfers. In fact, the interest rate is reduced from 21% APR to 19% APR if individuals choose to take advantage of automatic transfers.
nion ® , founded in 1934 in Waterloo , Iowa , is a not-for-profit financial cooperative owned by its members. The credit union offers a full range of consumer financial services and employs more than 500 Iowans throughout 24 branches. For more information, visit www.veridiancu.org or call (800) 235-3228.
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For Immediate Release
September 25, 2009
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