Published On: Mon, Nov 25th, 2019

Credit Union Loans Vs. Same Day Payday Loans

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When a consumer needs a quick cash advance, a same day payday loan or credit union loan may provide the answer. No credit check finance is particularly popular with those who have a poor credit history due to missed and late payments. However, the consequence of this is a higher rate of interest in order to underwrite the risk of the borrower defaulting. This means that any loan where no credit scoring takes place is only suitable for the short term (normally a calendar month or less).

Credit Union Loans or Same Day Payday Loans?

Banks aren’t interested in a customer who has a history of adverse repayments and/or very short term loans. This means that a no credit check payday loan is offered by a specialist private sector lender (such as a pawnbrokers) in return for a high rate of interest. The loan is typically offered for a month (i.e. until the borrower receives his/her pay). Credit union loans work on a similar basis, but are offered by a nonprofit organisation. Whilst this should mean that the terms are more competitive, this isn’t always the case.

The Cost of a Loan from a Credit Union and a No Credit Check Payday Loan

A same day payday loan will accrue $20 to $25 of interest per month for every $100 borrowed. The typical APR a payday lender charges its customers is 400-500% per annum.

Credit Union loans regularly have a 0% APR, but impose a hefty initial charge. For example, the Nevada Federal Credit Union charges a $70 fee for a $700 loan for just 14 days. The National Consumer Law Center pointed out that this equates to 455% APR.

Alternatives to a Credit Union Loan or Same Day Payday Loan

Credit Union Loans Vs. Same Day Payday Loans

Those who have suitable collateral, such as gold and jewelry, may be able to get a quick cash advance from a pawnbroker. Whilst the rate of interest is the same as for a no credit check payday loan, a pawnbroker may be able to lend money to those who are unable to comply with the lending criteria of payday lenders.

Why is a Quick Cash Advance Expensive?

Same day payday loans and a credit union loans cost more because the majority of their customers have a poor credit history. The other reason for the usury APR is that short-term borrowing doesn’t yield much interest so lenders charge more to cover their administrative expenses. This explains why the cost of loans from credit unions and payday lenders isn’t vastly different. However, credit unions are far more likely to be sympathetic to their members in the event of financial difficulties.

About the Author

- I am an internet marketing expert with an experience of 8 years.My hobbies are SEO,Content services and reading ebooks.I am founder of SRJ News andTech Preview.

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