Affinity program aiming to break payday loan cycle
Credit union, with help from United Way, to offer alternative through Restart Loan
REGINA Anyone who has relied on a payday loan to survive until their next paycheque knows how easy that can push a person farther into debt.
Often, families don’t have enough time to get the money together in the two weeks usually required to pay back the loan and are dinged with extra fees and high interest rates.
This system can create a vicious cycle in which more loans are taken out to repay previous loans, keeping families in poverty.
In an effort to break families out of the cycle and prevent others from falling into it, Affinity Credit Union, with the help of United Way Regina, launched a new program Thursday called the Restart Loan.
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,” said Kristen Nelson, associate director of community impact for United Way Regina.
“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,” she said.
As an organization that works to connect individuals and families with the services they need to thrive, United Way supports the credit union’s initiative.
According to data collected from the United Way’s Saskatchewan 211 service, which recently expanded to allow users to call, text or use an online chat feature, 21 per cent 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,” said Nelson.
“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,” she continued.
“We know that by connecting people to supports, we’re giving them an opportunity to thrive and that’s what our friends at Affinity have done with the Restart Loan Service.”
The loan amount can range from $200 to $2,000 with terms ranging from two months to two years at an annual interest rate of 17.99 per cent.
The longer terms offer more flexibility to pay back the loan and significantly lower fees than a traditional payday loan.
And where payday loans don’t help build credit, a Restart Loan will. The program comes in the wake of a small, but successful pilot project at three Saskatchewan branches in November.
“We know that unexpected expenses can pop up and when they do, they can affect an individual’s ability to manage until the next paycheque arrives,” said Fred Khonje, community adviser at Affinity Credit Union and the lead developer of the new program.
“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,” he said.
Khonje said the application process has been designed to be fair, fast, easy and non-judgmental.
Individuals can apply for the new loan at any of the 56 Affinity Credit Union locations across the province.
Individuals will be required to start an account and have the option of becoming a member for a $5 refundable fee. For more information visit affinitycu.ca.