10 Feb Banks, credit unions offering alternatives to payday loans
Mississippians take out an estimated 4 million pay day loans every year, at effective annual interest rates topping 500 percent. MPB’s Evelina Burnett reports, some nonprofits and banks are working together to offer alternatives to this costly credit.
Alisha has worked at this cheerful early head start program at Moore Community House in Biloxi for five years. But last year, unexpected surgery kept her out of work for 27 days. She had health insurance, but was sent an $800 bill before she even got back work. That’s why she says a $500 loan program her employer offers, through Hope Credit Union, was a lifesaver.
The Gulf Coast Community Foundation and the Mississippi Center for Justice have been working together on an education program about the dangers of pay day lending, as well as these alternative loan options. Alicia’s program was through her employer, but Hope also has a similar program for all of its customers.
Hope Credit Union Gulf Coast branch manager Kara Adams says Hope’s Stretch Pay Loan Alternative does require that the borrower be a customer for at least 60 days.
These alternative loans, which a number of other Mississippi banks and credit unions offer, have some of the same appeals of pay day loans – they’re small, short-term loans, with relatively low credit requirements. But they don’t have the huge interest rates and fees typical of payday loans.
Jerome Brown, director of community development at The First, says the bank’s First Aid loan program can also help build good credit.
The alternative loan programs also often include a savings component and financial counseling.