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Salary advance loans from credit unions.

Many credit unions offer Salary Advance Loans. These funds offer borrowers a more affordable alternative to payday or unsecured personal loans. These loans, often called SALO, are designed to help members cover unexpected expenses until their next payday. Credit Unions in general are more consumer-friendly, they often provide funds with lower interest rates and fewer fees. Learn about SALO loans and how to apply below.

In general, any type of loan, whether SALO or from another lender, should only be considered when all other options have been explored. As borrowing money, no matter how much or what the interest rate is, always comes with some risk.

What are SALO loans?

The Salary Advance Loans were created by credit unions in their desire to serve members and households with short term cash needs. A SALO can also be used by people with limited or lower credit scores, veterans who are seeking credit and other non-traditional borrowers. These non-profit credit union organizations are offering this product to help break the cycle of using payday loans, credit cards, or other more expensive forms of borrowing.

The programs typically allow members of the credit union to take out salary advance loans at a much more affordable rate - even less than 10% or so. This is an alternative to car title or other short term loans (such as payday), so people can get money without having to pay annual percentage interest rates between 200% and 900%. Not only will the annual APR rate be lower, but the origination fees that are required are also much less than what is offered at most payday lenders.

While each credit unions has their own terms and conditions, in general a SALO will usually have a maximum loan amount of $500-$5000. This is done in order to reduce risk to the family that is seeking funds. What has been discovered over time is that the money money someone borrows from a lender (whether a bank, credit union, or payday company) the greater the chance of entering into a cycle of debts.

Also, in general, the minimum amount that can be borrowed is $50 with an interest rate ranging from %5 to $20 (many loans are around 10% %) and they have no fees that people need to pay. Credit Unions believe that these products provide members a much less expensive way to access emergency funds for paying any critical bills they may have.

 

 

 

Salary advance loans offer borrowers a less risky alternative to other forms of cash, such as cash advances on a credit card, payday lending or pawn shop loans or something else. The product is less costly and the chances of the borrower paying back the money is much higher. They can help eliminate many of the potential negative financial impacts of payday loans and lenders on consumers. A SALO can even be used by someone who gets paid daily, through one of the employers that now pay people daily based on hours work. Learn more on daily pay direct deposit.

Why offer Salary Advance loans?

Credit unions are non-profit financial cooperatives that serve their members with various financial products. A SALO loan is beneficial for both the credit union and their customer. As it is another product combined with savings accounts, car loans, and more. These institutions are non-profit, which allows them to offer products like SALOs at more favorable terms than for-profit payday lenders, so the credit union can help them members while also making a profit for their business.

Many families, including military members or government workers, often need short term access to funds in an emergency. Salary Advance Loans can meet that need. They help a credit union keep a strong customer base while also providing affordable loans to their members, such as teachers, government workers, veterans, nurses and other types of typical credit union customers. Many credit unions offering SALOs also provide financial education and counseling services to help members improve their financial literacy. Get other Financial Literacy resources.

Families who joining credit unions may still find themselves struggling from time to time, so a credit union wanted to be sure that some form of emergency lending was available to them. These Salary Advance loans fill that need. Credit Unions are also non-profit organizations, meaning they want to in some form of capacity give back to, and help their members.

 

 

 

 

How SALOs work

SALOs work a bit differently from traditional loans from a bank or some other lender. As credit unions operate differently. Here's a typical process for obtaining a SALO:

  • Credit Union Membership and application: To apply for a SALO, you first need to be a member of the credit union. These non-profits tend to be more limited in the number of customers they take. The application process for a SALO typically involves proof of income and employment.
  • Loan terms: SALOs are usually small, short-term loans meant to cover a member until their next payday. Therefore the amount borrowed is contingent on the applicants income. Loan amounts can range from a few hundred to a few thousand dollars, with terms typically not exceeding a month or until the next payday.
  • Repayment: While the interest rate for a Salary Advance Loans is lower, with less fees, there are still strict repayment terms. The funds are designed to encourage responsible borrowing and repayment. This often includes automatic repayment through direct deposit from your paycheck.

As noted, SALO credit union loans are just one option, but they are limited to members. Before you take out a short term, high interest loan from a payday lender you want to explore all options that are available, whether from your credit union, a bank or another lender. A wide variety of personal financing and loan products are available, even to consumers with a low credit score. Many of these programs have flexible and relatively lower interest rate repayment options. Read more on how how to find payday loan alternatives.

Examples of savings achieved

The savings add up quickly. On a $500 cash loan for 30 days, borrowers will save at least $177 in total fees and interest. Those are some of the typical savings achieved with a Salary Advance Loan from a credit union.

$250 loan

Interest & Fees

Loan Amount

Annual Percentage Rate

Term

Total Finance Charges

Payday Lender

$15 per $100 borrowed for each 14-day term

$250

391.07%

28 days

$75.00

Salary Advance Loan

18% APR (maximum)

$250

18.00% (maximum)

30 days

$3.70

save
with a $250 loan
 

$71.30

$500 loan

Interest & Fees

Loan Amount

Annual Percentage Rate

Term

Total Finance Charges

Payday Lender

$15 fee per $100 borrowed for each 14-day term

$500

391.07%

28 days

$150.00

Salary Advance Loan

18% APR (maximum)

$500

18.00% (maximum)

30 days

$7.40

save
with a $500 loan
 

$142.60

 

 

 

 

Find a local Credit Union that offers salary advance loans

As noted, not all organizations offer a SALO. The terms and conditions set by each lender will vary. Many will also restrict who can join their credit union, such as some focus on teachers, government employees, members of the military, or even the employees at certain companies. The membership tends to be more restrictive than a traditional bank.

Not all credit unions will offer these salary advance loans either. People will need to make an inquiry at a local branch office to see if they have this product or not. Or maybe they offer another alternative. But no matter the case, it is always worthwhile to make an inquiry. To find a list of credit unions as well as any loans they offer, the ​National Credit Union Administration (NCUA) has a database. Use their website to locate a lender, or call them at 800-755-1030 for information.

 

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