Low Interest Salary Advance Loans From Credit Unions.

Salary Advance Loans offer a more affordable alternative to payday lending. However they are still costly to use, and should only be considered when all other options have been explored. The Salary Advance Loan Program (SALO) is a new loan product created by credit unions in their desire to serve members and households with short term cash needs. These non-profit organizations are offering this product to help break the payday lending cycle.

The programs typically allow members of the credit union to take out salary advance loans 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.

The SALO program will usually have a maximum loan amount of $500-$1000. 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, r payday company) the greater the chance of entering into a cycle of debts.

The minimum amount that can be borrowed is $50 with an interest rate below 18% (many loans are as low as 12%) 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 payday lending. 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.

Why offer Salary Advance loans?

Many families often need short term access to funds in an emergency. So this product was created. They are significantly less expensive than traditional payday loans. Borrowers do not have to pay a fee on the cash they borrow, and the interest rates are much lower. Most of the rates offered are 18% APR or lower on their advances.

 

 

 

 

Families who joining credit unions may still find themselves struggling from time to time, so they 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. This means that the costs incurred to them are lower than other lenders, so they can loan money to their members at a lower interest rate. So this product seemed a natural fit to add to their portfolio.

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

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.

Additional Credit Union loan products and low cost alternatives

When consumers need low cost financing for paying expenses and bills such home repairs, education, or car repairs, your local credit union is just one option. Households have many other ways to get the money they need in an emergency.

 

 

 

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 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 alternatives have flexible and relatively lower interest rate repayment options. Read more on some of the alternatives.

 

 

 

 

 

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