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Payday loan alternative available in Pennsylvania

[Apr 22, 2011.]


Since 2006, the "Credit Union Better Choice" program has offered short-term loans as an alternative to quick payday loans for emergency needs. The program not only offers loans at lower fees than those offered by some payday lenders, but it also includes a component that helps the borrowers begin to improve their financial situation. The program is a partnership between the Pennsylvania Treasury Department and the Pennsylvania Credit Union Association

Pennsylvania State Treasurer Rob McCord says that a typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or approximately $450 over 90 days. A $500 "Better Choice" loan costs consumers approximately $42.50 for the same 90 days.

Borrowers are required to deposit an additional 10 percent of the borrowed funds into a savings account, to encourage them to build an emergency savings fund. Financial counseling is offered to each borrower.

"Better Choice" loans are available at 79 credit unions with 222 locations in Pennsylvania. For information about the "Better Choice" program and additional financial education, visit www.patreasury.org.

Alternative to payday loans

For consumers residing outside of Pennsylvania, easy payday loans can sometimes seem like the only solution to a crisis arising from an expensive but mandatory car repair, a heating bill or a medical bill. If you have the ability to repay the loan as soon as it is due, payday advance loans can be helpful. The danger arises when you are unable to repay the loan and need to take out another one or pay high fees to extend your repayment period.

Before automatically choosing same day payday loans, consider some alternative sources for money:

  • Ask your employer for an advance on your upcoming paycheck.

  • Sell some of your possessions for fast cash.

  • Ask a friend or relative for a loan.

  • Contact your bank or credit union to see if they offer any short-term loans.

  • If you have a credit card with available funds, check on the cost of a cash advance. Sometimes the interest rates on a cash advance are more expensive than the fees for payday loans.

As soon as the immediate financial crisis has passed, make sure you contact a credit counselor (try NFCC.org) or develop your own plan to avoid facing a similar difficulty in the future. Start small by transferring a minimal amount automatically from each paycheck to a savings account so that funds will be available when you need them.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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