Personal Loans in Madison Help Break Payday Loan Cycle

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Advice from Dane County Credit union about breaking the payday loan cycle.
Break the payday loan cycle.

Instead of turning to a payday loan advance outlet for fast cash, consider the options for credit union personal loans in Madison and save yourself a LOT of money.

Typically payday is a day all workers look forward to. Who can complain about getting paid for all the hard work you put in at your job? But unfortunately, for some people, payday also means paying off what’s called a payday loan.

What exactly is a payday loan?

Say you’ve got a steady job, but most of your income is going towards paying rent, or car and student loans. Then, what if, for example, a loved one has a medical emergency, and you need some cash–NOW. Where do you turn?

According to the Community Financial Services Association of America, many people are likely to turn to a payday lender. The data shows that over 19 million households use payday loans for short-term credit annually.

To qualify for a payday loan, you simply need an open financial institution account, a steady income and some form of identification.

Will I pay fees?

To get a payday loan, you go to your nearest payday lending outlet and write a postdated check for the amount you want to borrow (usually between $100 $1000, though some states set maximum amounts) plus a lender’s fee. You can also simply authorize them to take the money directly out of your checking account on the date the loan is due.

When the pay date arrives (which is usually about two weeks from when you took the loan out) you’ll pay the lender back the money you borrowed PLUS the fee. Often this means using cash to redeem the check from the lender or allowing the check to simply be deposited at a financial institution. If, for some reason, you can’t pay the loan in full on the due date, you’re going to be charged interest rates upwards of 100%–though some states set maximums there, too.

It isn’t hard to get caught in the vicious cycle of not being able to pay off your payday loans, because the typical  payday window (again, two weeks) is so small. And when people can’t pay off their loans, they usually roll the loan over for another pay period, which makes them ridiculously expensive compared to other types of loans.

So goes the cycle.

Consider personal loans in Madison FIRST

If you are considering using a payday lender  – check first with your local Madison area credit union. At DCCU, we may have solutions that are a better fit for your needs at a much more affordable cost. Contact us now.

Can I break the payday loan cycle?

Unfortunately, it isn’t easy. But it IS possible.

  • If you can’t find a way to pay off your payday loan right away, borrow less money each loan cycle
  • Stick to a budget and cut your spending–but remember to continue to pay rent, utilities, etc.
  • Borrow only what you need, even if you’re pressured to borrow your full paycheck amount.

Fortunately, bigger entities have your back, too: Under President Obama, the Consumer Financial Protection Bureau is aiming to “address consumer harms from practices related to payday loans and other similar credit products” this summer. And, in July, Google will no longer be showing ads for payday loans. As their statement notes, “We will no longer allow ads for loans where repayment is due within 60 days of the date of issue. In the U.S., we are also banning ads for loans with an APR of 36% or higher.”

What are some credit-union-friendly alternatives to payday loans?

I’m glad you asked! Because here at DCCU, we have some great alternatives when you’re in need of some emergency funds.

Credit Builder Loan

Our Credit Builder Loan is a fantastic place to start. We take the money you need to borrow and put it into a certificate for either 6 months or one year. You’ll then earn interest on the certificate, all the while paying a very low interest rate. By the time you’ve paid off the loan, you’ve built up a savings account from the certificate and raised your credit score.

Share Secured Loan

We also offer the Share Secured Loan, wherein we lend you money and hold your current savings account balance (equalling the loan amount) until you can pay off the loan. When you have paid it off, you once again have access to the money in your savings account.

Consolidation Loan

A consolidation loan may help reduce your overall monthly payments to various credit cards, freeing up needed cash.

Personal Line of Credit – Kwik Cash

One of our more popular options is a line of credit called Kiwk Cash. It’s an open-end personal line of credit that’s tied to your checking account.

The service acts as a money lifeline: It’s always accessible to you when you’re in danger of overdrawing your account. Funds are automatically transferred from Kwik Cash to your checking account when the balance falls below $0. Members can also transfer money manually through Mobile Money or eBanking.

Kwik Cash is a line of credit so you can either make payments on the outstanding balance or pay it all off when you get a deposit. It’s much less expensive than paying an overdraft fee or getting sucked into the payday loan cycle.

Help is here!

  • Once you’re out of the cycle, start an emergency savings account so you can avoid having to get back into the payday loan cycle.
  • GreenPath can help DCCU members get back on track financially with a low cost debt management plan.

If you’re currently stuck in the payday loan cycle, or are worried you need a quick line or credit, please call us at 608-256-5665 or visit any of our Madison, WI-area branches. We’re more than happy to sit down with you and do what we can to help you continue to put your best financial foot forward–even on the way to payday!

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Tom S.

Tom is a 2006 graduate of UW Madison, currently residing in Verona with his wife and 2 girls. He has been passionate about writing ever since he was 15 years old, and displays that same enthusiasm in his work today. When he’s not sharing insightful financial wisdom, you can find Tom chilling on the Union Terrace, enjoying craft beer at the Great Dane, or hiking at Governor Nelson State Park. In the Fall he loves to take his family to Badger Football games!