Are these the latest rip-off lenders?
Quite the opposite. Unlike payday lenders that charge a mint to borrowers, credit unions offer loans at low rates and encourage people to save and budget.
Sounds like a good thing
They are. They are limited to charging just 2 per cent a month for loans but that means it’s hard for them to compete with payday lenders as they tend to make a loss on short-term loans.
Can’t rules be relaxed to allow them to compete?
That’s what the Government has proposed this week. It plans to increase the interest rate cap to 3 per cent a month, allowing them to offer affordable credit to those who otherwise may turn to rip-off deals.
When will this happen?
From April next year. It means the APR on credit union loans will rise to 42.6 per cent, which is considerably lower than the 4,214 per cent the likes of payday lender Wonga APR quote.
Can’t the Government cap payday lender rates?
Good question. Many people have been campaigning for a cap on the cost of credit but the Coalition has been persuaded that it’s not a good idea.
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