Short term loans. Payday loans. Predatory lending. What they are depends on how you view the unsecured, generally small-dollar loan businesses that number near 1,000 in the Show Me State. Is it economic freedom or exploitation of Missouri's poor?
For some Missourians, payday loans are the only resource to get cash when the money runs out and the bills are due. To others, they might be a last resort in an emergency. Candidly, they are also often the destination after poor financial decisions are made. This is why the local television show, "Missouri Viewpoints," examined the topic on a recent broadcast. It featured advice from Mike O'Brien, SVP and chief advocacy officer of St. Louis Community Credit Union, for those who want to get off from the debt spiral that often comes from using payday loans.
Whether the loan amount is $50 or $100, the interest can be in the hundreds of percent and it compounds quickly when not paid off in a timely manner.
"Credit unions are a very viable option," says O'Brien regarding these small-dollar loans. "There are small dollar loans available through most credit unions, and some credit unions even have payday loan alternatives that have very fair terms and low interest rates and fees."
O'Brien explains that people need to be proactive and establish a relationship with a local credit union or bank prior to taking out small-dollar loans. These types of loans are signature loans or lines of credit, so there is no collateral tied to it and there is a higher risk.
"Most credit unions that offer these types of products want you to have some type of a relationship with them -- say six months minimum with a checking account in good standing," continues O'Brien. "Then that way they will make that credit available to you and do so at a rate and a term that is much more favorable for you as compared to a traditional payday lender."
Check out the full episode of “Missouri Viewpoints” here. O'Brien's interview starts at 15:46.
Segments from Missouri Viewpoints are broadcast via television and radio stations throughout the state. Click here for an on-air guide. The Missouri Credit Union Association (MCUA) works with Missouri Viewpoints to feature credit union representatives on the show. If you would like to be considered for an interview, please email Halley Abbott, MCUA vice president of Communications. Interviews take place in St. Charles.
Caption: Mike O'Brien (left) talks with Mike Ferguson, host of Missouri Viewpoints.