Your roof is leaking, your car has broken down, or your refrigerator quit. These are all really good reasons that you may need immediate cash. Cash advance or payday loans can be an easy solution when you can’t wait for a bank loan or don’t have good enough credit to qualify. However, if you’re unable to pay back the loan as promised, the fees and interest pile on. What if there was another solution? You may be in luck, many employers are now offering payday-style loans to their employees. These loans offer lower interest rates and even make it easy to repay over time through automatic payroll deductions.
What Led to the Newer Payday Loan Option
In states like Virginia, payday loans were legalized in the 2000s, but with those loans came APRs as high as almost 800 percent. That rate was driving many borrowers into debt if they were unable to repay the loan at the end of the one- or two-week period. Laws were changed in 2008 barring payday loan companies from offering more than one loan at a time to a borrower. They also found themselves blocked from loaning more than $500, and loaning to military members and their families.
With the new restrictions, some borrowers were left out in the cold. Langley Air Force Base Credit Union became one of the first employers to offer payday-style loans. They understood that it can be tough to make ends meet. As a result, they came out with the QuickCash loan that kept the APR low and allowed repayment through payroll deductions. The Virginia State Employee Loan Program followed, offering loans of up to $500 for an APR of 24.99 percent.
The Trend Spreads Across the Nation
What appears to have started in Virginia is now spreading to other states and employers. In California, a company called SimpleFi is working with companies to offer low-cost loans to employees. Hyatt hotels in New Orleans also started offering employee loans with the help of Liberty Bank.
If you find yourself struggling to pay for an emergency repair, talk to your employer. There may be a loan program you’re not aware of that can help you get the financial help you need for a price you can afford. Just make sure that when the time comes to pay the money back that you have it available.