Payday Alternative Loans or PALS

Credit Unions are getting into the payday loan business. Not all PALs are a cheaper alternative to payday loans.

Actually, it’s against the law for federally chartered credit unions to charge more than 18% on loans. Credit Unions may brag about their 18% interest rate, but they still charge other fees that put the APR into the triple digits to make these loan profitable. USAToday brings some light to this in an article titled “Some short-term credit union loan rates may be high.”

One Credit Union in California reponded this way to an inquiry about their 275% APR. Kinecta spokeswoman Laura Oberhelman said

“the credit union’s loan is competitively priced and in compliance with federal regulations governing such loans. In many cases, a short-term loan is less costly than paying overdraft fees on a checking account or re-establishing service with a utilities provider.”

Of course, the news rarely tells you that. They also don’t make a stink when banks, like Fifth Third, get into the payday lending business.

So we have payday lenders, credit unions and banks all saying the same thing: You can’t make money at 36%!

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