How Credit Unions are Trying to Replace Payday Loans

There is an urgent need of credit unions in the cash advance scenario which is overcrowded bycostly payday advance providers. A current study done by Filene Research Institute on 'The Impactof Two Tiered Banking Credit Unions Can Bridge The Divide' has thrown more light on thisparticular dilemma. The payday loan providers tend to be present right next in front of the lendinginstitutions which have government and firm controlled processes for loan.

The loan borrowers believe taking a loan from these lenders easier in case of low, no or poor creditwhatsoever. The financial urgency of the borrower becomes a godsend for all these payday lendersand they readily trap the borrower in a cycle of debt.

The credit unions still have a long way when it comes to understanding the needs of modern dayloan borrowers to go. Many consumers say that they will prefer to opt for a payday advance as it isquicker and helps them in time of financial stress, irrespective of what the interest levels are. On theother hand, little dollar loans are sometimes denied by credit unions to applicants who possess alimited credit history. If we consider a recent study http://investedcredit.com, payday loans havesnatched 14,000 jobs and $943 million from the U. S. Economy in the year 2011.

The centre for responsible lending claims - 'The higher interest rates of 400% to 500% per annumcoupled with repayment schedules that are tight trap the payday loan borrower to get a long time.The right efforts in the credit unions can surely discourage them while we might not expect the $44billion per year cash advance industry to disappear in a day. The credit unions can reach byimproving in loan approval in areas like ease in loan application and benefit combined withcomfortable credit records, these payday lenders hard.

By improving on their hazard handling skills side by side the credit unions need to boost their loanofferings. Through the use of a fruitful model together with technical support for beginning abusiness, boost in the leading public figures, financial benefits, and persuasive messages consumersmight be attracted towards credit unions.

State advocates can do a great job if their encouragement is combined with efforts of statetreasurers, credit union league, the National Credit Union Administration along with the ConsumerFinancial Protection Bureau. At last, credit unions using a dedication can function the borrowerswho wind up feeling trapped by payday lenders when refused loan by leading loan suppliers.