Credit Union to beat loan sharks by joining them with payday loans
Auckland and Whangarei based Westforce Credit Union recently launched a payday loans service in an attempt to undercut loan sharks who are locking Kiwi families into a crippling cycle of debt – sometimes with terms that can include an annual percentage rate of more than 500 per cent interest.
The service has been launched from the Onehunga Branch of Westforce Credit Union and, if successful, will be rolled out in other branches.
Westforce Credit Union Operations Manager, Victor Martick, said the credit union's payday loans will be interest free and used to spearhead the organisation's attempts to drive loan sharks out of the areas where the credit union operates, specifically Avondale, Onehunga, Papakura, Pukekohe and Whangarei.
"Payday loans are a modern day scourge. They're destroying communities and leaving food off the tables. As an organisation set up to help the community, we agonised long and hard about offering this service. However, there is no escaping that they are here and people are using them.
"Our objective is to beat the loan sharks by joining them. We're hoping the interest free loans will get people through our doors and, by making the payday loans interest free, give them a real fighting chance of breaking this vicious cycle of debt. It comes as a cost to the credit union, but we are here to help our community," he said.
Mr Martick said that while loan sharks argue that the annual percent rate (APR) is not really applicable to short term loans, the reality is that people become regular users month after month and that does ultimately equate to repayments of more than 500 per cent a year.
It is, however, always better to front up to creditors than to shut your eyes to it, or to borrow from Peter to repay Paul. Three important steps to take when mitigating against having to take a payday loan, or incur debit charges include:
1. Plan ahead – know your money situation, and when payments are due, ahead of time;
2. Cultivate awareness – operate a budget and review your finances weekly;
3. Talk to creditors – get on the phone and discuss debit deferments or repayment plans.
"Talk to your creditors. Make arrangements – it's a lot of work, but it is far more preferable to the death trap of payday loans. If you are really stuck, then talk to the credit union about an interest free payday loan to help you get through," he said.
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