Payday loans have merged into bank and credit unions lending portfolios. These two financial industries have done so to keep up with the borrowing demands of the average person. So many struggling households and problems with debt have cut a large percentage of people out of the normal lending options.
The big difference between banks and credit unions is that the credit union is a non-profit alternative. The credit unions are owned by members rather than shareholders for banks. This means that profits which are earned are reinvested into member services rather than distributed to the investors of banks. Some people will only do their banking with a credit union due to some of the benefits by being a member there:
- Credit Unions can offer lower interest rates. The difference is not significant, but the fact that there are no investors to be paid out of the profits, they are lower than a bank’s rates. The better rates can be found on car loans, personal loans, and deposits.
- There are many more opportunities for free checking accounts at a credit union.
- More personal service than larger banks.
A drawback to doing business with a credit union over a bank is that they are not located nationwide like their counterparts. For those who like the personal touch, if you move or go out of town, credit unions will not be conveniently located. A second drawback is that with all of the technology and apps for smartphones, the credit unions will not have the same quality or quantity offered as larger banking institutions.
Both banks and credit unions offer payday loans.
The online payday loan industry has filtered its way into both financial institutions. The loans offered continue to carry higher interest rates along with online payday loan lenders. These loans are risky loans given out to those with poor of no credit. It is one more service being offered to the credit union members or bank customers which can cause damage to personal finances. The banks and credit unions work their loans very similar, but here there are more consequences. These institutions will have more control over your accounts, especially when it comes to you receiving deposits. An online payday loan lender will have a payoff date arranged with you, if you miss it, there will be another one set up. A bank and credit union will have firsthand knowledge of a deposit, and if you previously had missed a payment, they will have immediate access to the newly deposited cash. Banks and credit unions have been known to freeze accounts if direct deposits are redirected somewhere else.
Online payday loans are small businesses offering low cost payday loans to those who are in need of some fast cash. The rules are the same as with banks and credit unions. Pay the loan off with the fees at your next paycheck. If you choose to extend the loan, the payment for the remaining balance plus interest will be expected at your next paycheck. These direct payday loans are what they do without interfering with other banking services.
