Credit Union Better Choice Saves Consumers Nearly $10 Million
HARRISBURG — Christmas gifts, car repairs, traffic fines, and even funeral expenses were some of the uses cited by Credit Union Better Choice borrowers. Through this payday loan alternative, credit unions have issued more than 28,000 loans totaling more than $13.4 million dollars since 2006. More importantly, nearly $10 millions dollars were saved by borrowers over using a traditional payday lending product and they were also able to place $1.3 million into savings accounts.
Since the program’s inception, 82 credit unions with 215 locations have agreed to offer Credit Union Better Choice loans, with additional participants continuing to sign on. During the second six-month cycle (July 1 – December 31) of 2009, 8,163 loans totaling $3.9 million dollars were issued. For the entire year of 2009, there were 13,462 loans issued, totaling $6.5 million.
The Credit Union Better Choice program is offered through participating credit unions and is a partnership of the Pennsylvania Credit Union Association and the Pennsylvania Treasury Department. To learn more about the program and a view a list of participants, visit www.PaCreditUnions.com.
“In our rough economy, many Pennsylvanians are finding that their paychecks do not stretch far enough when unexpected expenses occur. I’m proud that credit unions offer an alternative to the high-cost payday lenders for short-term borrowing needs,” said Jim McCormack, President/CEO, Pennsylvania Credit Union Association. “More importantly, the credit unions are offering financial counseling to assist borrowers with money management and credit.”
“Better Choice connects hard-working individuals with the quick cash they occasionally need for an unexpected expense or between paychecks, and helps them avoid the ‘debt trap’ of usurious loans – in fact, since inception, Better Choice has spared Pennsylvanians nearly $10 million in interest and fees,” Treasurer Rob McCord said.
A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or approximately $450 over 90 days. A $500 Credit Union Better Choice loan costs consumers approximately $42.50 for the same 90 days and at the end of the loan term, the consumer has $50 in a savings account, which allows them to develop a savings habit. In addition, the program builds upon this new wealth-building component by providing financial education to consumers in an effort to help them make better informed financial decisions.
Pennsylvania consumers saved an average of 80 cents in loan fees and costs for every dollar borrowed through a Credit Union Better Choice loan rather than through a typical loan from a payday lender. This translates into more than $9.6 million that consumers kept in their own pockets by using credit unions that offer Credit Union Better Choice loans. In addition, borrowers were able to place $1,331,928.50 into savings accounts for future needs.
Total Number of Loans Issued 10/19/06-12/31/09: 28,238
Total $ Amount of Loans Issued: $13,319,285.04
Total $ Amount of Consumer Savings vs. Payday Lender: $9,640,798.40
Average Loan $ Amount: $471.68
Credit unions are financial cooperatives that provide affordable financial services to help their owner/members. The Harrisburg-based Pennsylvania Credit Union Association is a trade association that provides legislative, promotional, educational and operational support for more than 500 credit unions in Pennsylvania. These credit unions have assets in excess of $31 billion and serve more than 3.5 million members. For additional information about credit unions or to find a credit union near you, visit www.ibelong.org.