More credit unions are doing short-term loans that provide a great alternative for people who might otherwise go to payday lenders.
Payday loans that you obtain from an online lender or from a storefront operation routinely have interest rates of 300%, 400% or 600%. Yet a short-term loan from a credit union might have an interest rate of 18% — much higher than you’d normally get at a credit union, but laughably low compared to the payday lenders.
If you are pinched, and can’t keep the lights on or put food on the table, know that payday lenders lurk waiting to exploit you. So first things first, consider joining a credit union if you’re not already a member of one. As an alternative, it may also be possible to talk to your employer and get an advance on your next paycheck.
Meanwhile, equally as bad or maybe even worse in some states are the title pawn loans, where you pledge the title of a paid-off vehicle against an ultra-high interest loan. In some states, you could lose your car worth thousands against a loan of a couple hundred bucks if you default. In that situation, the title pawn operator gets the car, sells it and keeps the money. You get nothing from that sale whatsoever. Ugly, isn’t it?
