There are plenty of financial experts who claim that if you’re in a situation where you need same day loans, there are consumer payday loan alternatives offered by banks and credit unions that are less expensive. However, as sources like ConsumerAffairs.com indicate, many of these bank and credit union quick loans available the same day are burdened by their own high fee structure. A recent study by the National Consumer Law Center (NCLC) reviewed hundreds of different types of small, same day loans that banks hype as payday loan alternatives and found them to be less than desirable.
Payday loan alternatives: Shouldn’t they be cheaper?
Setting aside the much-referenced academic study that shows that same day loans aren’t actually expensive, the truth is that when it comes to payday loan alternatives, most do not improve upon the model they’re designed to replace. Lauren Saunders of the NCLC stated in the report that “too many providers of so-called payday loan alternatives hit consumers with some of the same onerous provisions that predatory lenders use to saddle unwary and vulnerable borrowers with loans they can’t afford to repay.”
Report co-author Leah Plunkett agrees, stating that while “Many genuine payday alternatives are in the market,” many of the alternatives are worse financially than payday loans. Specifically, Plunkett references check account cash advances from such big banks as Wells Fargo Bank, U.S. Bank and Fifth Third Bank. “They are payday loans, plain and simple: triple digit loans repaid on the next payday.” That’s hardly an improvement over the already popular same day loan product.
Credit unions offer quick loans the same day, but at what discount?
The NCLC study found one credit union in California – Kinecta Federal – that exploited loopholes in lending laws in order to profit as much as possible while still being able to suggest they’re one of the cheaper payday loan alternatives. Kinecta offers a 14-day loan with an APR of at least 362 percent, a rate which is comparable to some same day loan rates, but not cheaper. Other credit unions offer what amounts to expensive payday loan alternatives via a third party lender, E-AccessLoan.com.
What should payday loan alternatives do for consumers?
“Payday loan alternatives that help consumers must be repayable affordably and over time, so that hard-pressed borrowers who need short-term help can climb out of debt rather than get trapped in it,” said Saunders. Unfortunately, many of the payday loan alternatives banks and credit unions offer are not their as an offer of goodwill. They want to profit from consumers as much as the law will allow.