A recent report published by The Pew Charitable Trusts highlights the high fees being charged by payday lenders. On this episode, Tony speaks with Altra Federal Credit Union’s VP of Consumer Lending, Mark Tierney, to discuss alternatives to payday loans, as well as what to know when borrowing money.
More financial resources and education can be found at altra.org.
Transcript
(Tony Beyer)
Hello and welcome to the Best Life Podcast for we here at Altra Federal Credit Union are helping you live your best life. I’m your host Tony Beyer. Thanks for listening. In this episode of the Best Life Podcast. We wanted to talk about payday loans, specifically alternatives to those loans and, you know, now with people struggling to make ends meet and the cost from groceries to gas rising due to inflation. Some may turn to payday loans and they are small, short-term loans that may be easy to get, but they come with a lot of risks. In fact, a recent report published by The Pew Charitable Trusts, which is an independent, nonprofit organization. They report that on average 12 million people take out payday loans, every year and paid $9 billion in fees, billion with a “B” annually. Interest on payday loans can be 100% 200-300 even more than that in interest, especially in states like Wisconsin and Texas, which have interest rates well over Five hundred percent for these payday loans, which is just staggering. So here to tell us a little bit more about how Altra can help its members and to offer some expert advice on alternatives to these loans we are joined by our VP of Consumer Lending Mark Tierney, welcome to the podcast, Mark.
(Mark Tierney)
Thank you. I appreciate you having me.
(Tony Beyer)
Absolutely Mark. We really appreciate you taking the time for the podcast and I was hoping you could tell us what can Altra do for members that may have a payday loan or maybe considering taking out a payday loan in the future.
(Mark Tierney)
Sure. So, for the members that have a payday loan already, one of the first things they may want to do is talk to Altra about refinancing that payday loan into a loan that offers a more favorable terms. The better terms might be a lower interest rate, lower payment, or a term that better fits their wants and needs. The other thing for those may be just at the point of considering a payday loan, I recommend looking into all of the options out there before taking out that loan. Options could include speaking with your local bank or credit union, hopefully Altra, or searching online for alternative lenders. It is important for people to compare both the rates and the fees of all the options to make sure that the payment is something that’s affordable for them.
(Tony Beyer)
Absolutely, and talking about interest rates I know that we can offer lower interest rates than 338%, that is according to that that report. They said in Wisconsin that if you are taking out just a $500 loan, paying it back over four months, it would be $395 just in interest and fees right there, and it’s even more in Texas. According to their report, you borrow $500, want to pay that back in four months, it’s going to cost you $645 in fees, which would be 527% interest, so a lot more and better options I’m sure you can find elsewhere.
(Mark Tierney)
Right, and one of the things common with payday loans is that they do the loan terms with a fee versus a percentage rate, so often times people don’t understand what percentage rate they’re even paying, so it’s important to compare both the rate and or the fees so that you can find an option that’s best for you and cheapest for you.
(Tony Beyer)
Yeah, that’s a great point about payday lenders using fees instead of interest rates, so a really good thing to know, and I also wanted to point out that according to the Wisconsin Credit Union League, 97% of credit unions in Wisconsin, they refinance payday loans and have helped out members, we certainly do that at Altra, and Mark, as far as qualifying for a loan here at Altra, What is something our members should know, or what should they keep in mind when applying?
(Mark Tierney)
Sure. Anytime you’re applying for a loan, a lot of factors that go into determining if somebody qualifies things such as credit history, ability to pay, the amount that they’re looking to borrow, if the loan has collateral something like a vehicle, what I recommend is sitting down with someone at your primary financial institution and talking with them about how they might qualify for the loan now, or if they’re looking in the future, what things they can do, to be better prepared to qualify or improve their credit so that they are able to get approved when they’re ready.
(Tony Beyer)
That’s great advice, and Mark, besides just, you know, the lower fees, the lower interest rates on loans, what are some other advantages a member has when taking out a loan with Altra?
(Mark Tierney)
Yeah, with Altra, and some of the advantage for borrowing with Altra include great rates, various loan options, our great employees who are willing to sit down and try to help, and Altra’s willingness to do small dollar loans. As you’ve mentioned some of the costs and rates and fees. According to the CFPB, a fee of $15 per $100 borrowed is common on payday loans, and that would equate to an annual percentage rate of almost 400 percent for a two-week loan. So again, putting those fees in terms of percentage, you can really compare them. Because Altra, as a Federal Credit Union, the maximum rate that we charge on any loan is 18% and on unsecured personal loans, we have rates even as low as 8.99% and the rate is based on someone’s credit score at the time that they apply. The other, I guess, last point as far as options, Altra has a few different options we can look at from a personal unsecured loan, a line of credit, or possibly using a loan with collateral against such as a vehicle, which may offer somebody a better rate or a better ability to get approved.
(Tony Beyer)
Excellent, and I know that you’ve been in the financial field for quite some time, a ton of experience here with the credit union, and again, we’re speaking with Altra’s VP of Consumer Lending, Mark Tierney, any general advice Mark, that you give those who may be considering a payday loan or having a little bit of trouble making ends meet, or maybe they see that coming on the horizon?
(Mark Tierney)
Yeah, I think the best advice that I can give is to research your options. Again, compare fees, rates and then truly work with somebody you can trust, but make sure you have a good understanding of what the terms of the loan are before you sign the dotted line.
(Tony Beyer)
Absolutely, doing that homework really, really important, knowing, looking at all of your options available and know that there’s plenty of them right here at Altra.
(Mark Tierney)
Absolutely.
(Tony Beyer)
So that’s all the questions that I have for you Mark. I know that you’re incredibly busy, we’ll let you get back on with your day, and we’re about out of time, but are there any questions that I’m not asking or is there anything that you wanted to talk about here at the end?
(Mark Tierney)
No, I think you hit all of the main points on this. And again, I think education and knowing is the biggest part when it comes to comparing payday loans to other options.
(Tony Beyer)
Yes, that education piece so important, I completely agree and to help educate yourself if you haven’t listened to it already, it was our last podcast of 2021. We sat down with Jackie Urban. She is our Credit Services Supervisor, we talked about budget plans, spending strategies, what to keep in mind, things that can hopefully keep us out of a position where we may need a payday loan, there’s a lot of resources on our website at altra.org, and we’ll have more information in the show notes that you can find on this podcast. Thank you so much for joining us Mark, we really appreciate your time.
(Mark Tierney)
Thanks Tony, I really appreciate it.
(Tony Beyer)
On this episode of the Best Life Podcast we spoke with Mark Tierney, who is Altra Federal Credit Union’s VP of Consumer Lending.
Well, that’s going to do it for this episode of the Best Life Podcast presented by Altra Federal Credit Union. We appreciate you taking a moment to learn how you can live your best life. If you have a question or a topic you’d like us to cover, send me an email at: tjbeyer@altra.org and who knows, it may even make it into a future episode. Don’t forget to follow the Best Life Podcast pretty much wherever you get your podcasts or find it on our website at altra.org.
Thanks again, be well, and we’ll talk to you again soon.
