Windsor Family Credit Union enters payday loan market
'It's not going to serve everyone, simply because the interest rate is still there'
A local credit union is offering an alternative for people borrowing high interest payday loans.
Windsor Family Credit Credit Union has introduced 'SmarterCash: A Pay Day Loan Alternative.' It offers loans ranging from $500 to $2,000, with fees of $1.42 for every $100 borrowed.
Pay Day Loan companies in Ontario can charge up to $21 per $100 borrowed.
To access the payday loan, customers must have an account with WFCU, which will cost you $5.
"We need to educate users of payday loan entities that they are paying too much for short term financing when there is an alternative," said Eddie Francis, President, WFCU Credit Union in a statement.
He believes this is a smarter and responsible solution to high interest payday loans. A local financial adviser said her industry calls payday loans a necessary evil, because it's the only way for some to access credit.
"We're not happy that they exist," said Wendy Dupuis, executive director at Financial Fitness.
She want to remind people that payday loans should be for emergencies. But they're often used by people on low incomes to get by.
"The debt spirals and gets out of control and people are in trouble very quickly," said Dupuis.
She thinks the WFCU loan could be a better alternative.
"It's not going to serve everyone, simply because the interest rate is still there," said Dupuis, "It's still high. We have to remember these are the people who can least afford to borrow money. I know that they're in a high risk category but they are the people that are generally not able to access any other form of credit. And for credit to be that expensive for them, especially for small amounts is really harmful."
That's something Elijah Cadarette knows well. He's borrowed from payday loan companies before. Cadarette said one lender charged him 49 per cent interest. He has advice for anyone thinking of using them.
"I would say you have to consider the rating," said Cadarette, "What you have in terms of income. I think payday loans are bad news regardless."
WFCU also offers a 'Step Up' loan program for those using the 'SmarterCash' loans. It will offer members who have a successful credit history lower interest rate, higher limits, one-year terms and cash advances.
Dupuis offers another solution. She recommends those who are stuck in the cycle of using payday loans to get back to go to a reputable non-profit credit counseling agency.
"There is help available in the community," she said.