It is a well-known fact that payday loans are very expensive and some of these payday loans carry a very high amount of fees which could be equal to even a 400% rate. A great alternative to payday loans is payday alternative loans, these loans are simply more affordable than the payday loans and the repayment term for these loans is also longer.
People often blindly go for payday loans because they are considered an instant source of cash and if someone is facing a cash crunch, they go for these, but the reality of payday loans is the number of fees that you are going to end up paying is so high that you will need to reconsider your decision.
In this scenario, we highly recommend you going for the payday alternative loans which are very attractive as the fees charged from you are very less in this case and also you can get out of a seemingly unending cycle of debt that is created by payday loans.
The only issue that we might have you in a notice about payday alternative loans is that they are not that easily available and are offered by only a few Federal credit unions. There is an overlooking authority called the National Credit Union Administration that approves credit unions to issue payday alternative loans.
Payday alternative loans explained
Payday alternative loan can be considered a small loan which is offered by a very small number of Federal credit unions for a short term. To go for payday alternative loans there are certain requirements that you need to fulfill, these requirements are quoted by the National Credit Union Administration.
In totality, there are two types of payday alternative loans. One is called the traditional payday alternative loan and other is payday alternative loans II. in the case of traditional payday alternative loans, the rules are
- You need to be a member of the credit union for at least a month to get this loan
- The loan amount cannot exceed $1,000 and cannot be lower than $200.
- Loan repayment terms are limited to one to six months.
- The unions cannot charge a fee for processing in an excess of the basic requirement.
- The rate of interest cannot exceed 28%.
The rules for the newer type of Payday alternative loans that are called payday alternative loans II are slightly different.
- Borrowers do not need to be a member of a credit union for a month and they can apply as soon as they join.
- The loan amount can go as high as $2000.
- The loan can be repaid between 1 to 12 months.
- The rules for the application fees are the same as a traditional payday alternative loans.
- The interest rate can also not exceed 28% in this.
- Payday loans vs payday alternative loans
Here, we will talk about the key differences between the two types of loans mentioned here.
- Payday alternative loans are only offered by a selected few Federal credit unions. While payday loans are offered widely by a large number of for-profit lenders.
- The credit unions that can provide payday alternative loans are completely regulated by the Federal government and works for the benefit of the people and not for the profit-making objective.
- The institutions providing payday loans are profit-oriented institutions and the activities undertaken by them can also be considered as predatory lending.
- Apart from who offers them, there are differences between payday loans and alternative loans including the total amount of cost, the nature, and quantity of risk involved when applying and the qualification criteria.
- Loan fees amount and terms
In the case of payday alternative loan, you will be able to borrow more amount of money when compared to payday loans. Regardless of the higher limit, in general, you can borrow up to $2000 in the case of payday alternative loans and up to $500 or less in case of payday loans.
Talking about the cost of getting one of these loans in the case of payday alternative loans the cost is tremendously lower than its competitor as mentioned above. In payday loans, the cost can be around 10 to 30 dollars for each $100. While in the case of payday alternative loans there is just an application fee that can go up to $20.
You will have to repay the alternative loans between 1 to 12 months while the payday loans are usually required to be repaid within two to four weeks.
Qualifications
As mentioned above to apply for a payday alternative loan you need to be a member of the Credit Union for at least a month. Apart from this, you need to demonstrate that you have certain financial qualifications to be able to repay that amount.
And for the case of payday loans, the institutions just try to lend as much as they can and once you are the member of the payday alternative loans you can simply apply for the loan and they will provide it to you without doing any kind of background check for your financial consistency.
Rollovers
In the case of traditional payday loans, there are multiple rollovers available and this might seem attractive to a stupid person but you must not forget that this increases the overall cost exponentially and this is a strategy to get as much money back and profit as they can.
In this case, the borrowers agree to the more interest and fees are charged upon them that gets them into a vicious cycle of debt which is very difficult to get out of.
If you’re looking to avoid all of it, it is highly recommended to go for payday alternative loans because the rollover is limited and the amount of cost that will add up substantially reduces if you choose this alternative.
If you think that you are financially stable and require a small amount of money as then we highly recommend you to go for payday alternative loans because they are more secure overall and more transparent.
