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We have plans for ourselves when we’re playing the game of life. We have all the hopes and dreams in the world to make it to the financial and spiritual peak of our respective mountains. The reality is sometimes the path getting there is hardly the shiny yellow-brick road we anticipated.

Our contemporary reality is that, even before the worldwide catastrophe that is COVID-19, according to CareerBuilder 78% of Americans live paycheck-to-paycheck in order to make ends meet. Additionally, 54% of Americans are struggling with some aspect of their financial lives. The effects of the coronavirus have only exacerbated the daily struggle for such workers, the most vulnerable being the ones who can’t afford what’s happening. 

According to the U.S. Private Sector Job Quality Index, more than 37 million jobs in the U.S. are vulnerable to layoffs in the immediate-to-near future, with the restaurant industry grinding to a halt, along with clothing and retail. As expected, weekly jobless claims have begun to skyrocket. Recent analysis from the Economic Policy Institute showed an estimated 3.4 million unemployment claims were filed week ending March 21, the highest weekly increase in American history. “This will dwarf every other week in history,” said EPI’s Aaron Sojourner, with colleague Paul Goldsmith-Pinkham adding, “The true impacts are undoubtedly of larger scale than described here.”

Photo by Andrea Piacquadio | Pexels

Right now, as much as ever, America’s financially struggling consumers require the mentors and financial resources available at their local credit unions that can guide them back on the path to financial wellness. It is with that mindset members and non-members alike need the tools, resources, and trusted guidance like at no other time in recent history. That’s why we’re driving ahead with our year-long exploration of the 5 Pillars of Financial Health, starting with the oft-maligned, yet necessary first step, Borrowing.

In the midst of such economic uncertainty, we believe members’ ability to borrow responsible, affordable credit is a critical first step in their journey to get their finances above water and move forward in their goal of working their way back to financial health. 

The practical benefits of borrowing are many. The usefulness of a loan could be virtually anything – home improvement, electric bills, medical costs, auto repairs, or even an important small business expense. The advantages in borrowing from a credit union include: 

  • Double digit vs. triple digit annual percentage rates
    • It’s staggering to know the average payday lender in America charges a 400 percent annual percentage interest rate. Credit unions have the ability to fight this atrocity by offering payday alternative loans. These types of loans can help borrowers avoid the dreaded debt trap so prevalent with high-cost predatory lenders.
  • The potential to consolidate debt
    • By borrowing money from a credit union at a lower interest rate, members can pay off high interest debt if they’ve used payday lenders in the past. The savings received over the long-term can be substantial for the member.
  •  Help the member build a good credit history, yet not relying on a credit score to offer credit
    • Credit unions’ natural function is to help members become more financially secure. For those CUs who offer them, payday alternative loans (PALs) are structured to help borrowers make their on-time payments, employing lower interest rates with no additional fees, and thereby improving their credit history.
    • Our small dollar lending platform uses relationship data vs. a credit score to determine creditworthiness.
  • Instant access to funds if using our SaaS-based mobile lending platform
    • If the payday alternative loan is available through the credit unions’ digital phone app, the app’s proprietary algorithm handles the quick decisioning and deposit into the borrower’s account

There has never been a better time to plan for how your credit union will help struggling members during challenging times like these. Aiding them with a responsible, steady, and productive small dollar lending experience provides your members with a lifeline when the unexpected happens. For more information, join us on April 14th for a webinar where we discuss just that. Register today.

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