REGINA, Saskatchewan–A credit union here has partnered with the local United Way on a new program aimed at keeping more people from falling victim to the cycle of payday loans and simultaneously helping them to build credit.
Affinity Credit Union has joined with United Way Regina to launch the “Restart Loan.” The product offers funding within an hour for those who are approved, terms out to 24 months, and rates below those of other lenders.
Similar to a payday loan, those who apply often get their loan within an hour, but have two to 24 months to pay it back at lower interest rates.
“One thing that we know about poverty in Saskatchewan is that people tend to be staying in it longer than they have in the past,” Kristen Nelson, associate director of community impact for United Way Regina, told the Leader Post. “Having these alternative options that are much more positive and … allow them to build credit and allow them to build that financial knowledge, are so key to seeing people thrive.”
Nelson offered the comments during a ceremony announcing the new Restart Loan at Affinity CU’s Rochdale branch.
A ‘Crisis Situation’
According to data collected from the United Way’s Saskatchewan 211 service, 21% of the services searched on the website were people looking for financial or income supports.
“It becomes that crisis situation when the choice comes between if you’re going to feed your children or pay your rent or if you’re going to go further into debt,” Nelson said in comments with the Leader Post. “A lot of families are going to choose to go further into debt so they can continue to meet those basic needs for their families.”
The Restart Loan offers amounts from $200 to $2,000 with terms ranging from two months to two years at an annual interest rate of 17.99%. The longer terms offer more flexibility to pay back the loan and significantly lower fees than a traditional payday loan, according to the credit union.
Helping Build Credit
In addition, the Restart Loan also seeks to help borrowers to build credit. It follows in the wake of a successful pilot project at three Saskatchewan branches in November of 2017, according to the Leader Post.
“We know that unexpected expenses can pop up and when they do, they can affect an individual’s ability to manage until the next paycheck arrives,” Fred Khonje, community advisor at Affinity Credit Union and the lead developer of the new program, told the publication. “We saw there weren’t many options in the marketplace for those needing a fast, short-term loan that didn’t have high fees attached to it.”
Khonje added the application process has been designed to be fair, fast, easy and non-judgmental. Borrowers may apply at any of Affinity CU’s 56 branches. Individuals will be required to start an account and have the option of becoming a member for a $5 refundable fee, the Leader Post added.