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Don't get trapped with a payday loan


By: Lorene Turnquist

Ever needed a little bit of money fast? You’re not alone. In fact, credit unions were originally founded on the premise of meeting short term, small dollar loans to help their members because traditional banks wouldn’t fill this need. But over the years things changed; credit unions started to focus on other types of loans and payday lenders saw an opportunity and grabbed it.

Fast forward to today. There are more payday lender stores in the US than there are McDonald’s restaurants. And while most payday lenders are legit, licensed and reputable businesses, they charge a lot for these small loans. And the way they are designed, a payday loan is difficult to get out of once you get in.

Payday loans are simple. The rules vary from state to state but in Washington you can get up to 8 payday loans each year, borrow a maximum of $700 each time and then you pay it back in full on your next payday. The problem with these come into play when that payment is due. Essentially you’re shorting your next paycheck by the $700 (plus the fee, generally about $95). With a smaller next paycheck, many borrowers are forced to repeat and get another payday loan to keep their head above water.

Our advice to you is to avoid using payday loans. But we know you still may have a need for short term credit. Some credit unions, like eDCU recognized lots of their members were relying on payday lenders and knew they needed to provide a better service their membership. So we came up with the Cash Flow Loan. It works like this:

  1. Borrow between $50 and $1500
  2. Loan must pay in full within 12 months and the minimum payment must be at least $50 per month.
  3. No credit check is required
  4. The amount you can borrow is determined by taking a percentage of the amount you deposited to your eDCU account the prior month.

We charge a flat fee of $25 for this service. It is a more responsible way to borrow because you don’t have to pay it back all at one time. It is more cost effective. And it is a way to build your good credit history because payments on Cash Flow Loans are reported to the credit bureaus.

So next time you feel a financial pinch, drive past those payday loan stores and reach for the alternative.