Vancity recommends payday loan alternatives following ban in Maple Ridge

A recent bylaw prohibiting payday loan companies from opening up new centresin Maple Ridge, B.C., hascredit experts recommending instant cash alternatives to people living paycheque to paycheque.

• Maple Ridge bans new payday loan centres

Vancity is one of thefirst mainstream banking and credit institutionsin Canada to offershort-term loansof $1,500 or less to its membersat 19 per centinterest with no added fees.

It sayssome 900 "Fair & Fast" loans have been approved since the program began a year ago, and the default rate has been "extremely low."

"It's much, much more reasonable, easy to pay back, [and]you develop a credit ratingwhich is really important to your future," said Linda Morris,senior vice president of business development, member and community engagement atVancity.

"The other piece of it is that you're actually developing a relationship with, in this case, a credit union,whichmeans you can be there toreceiveadvice [and]the possibility of other financial services."

"In other words, you're not being seen as a transaction but rather as a whole person."

However, Morris acknowledges thatnot everyone iseligiblefor a short-term Vancityloan.The credit union looks at an individualsincome, credit history,and the likelihood of paying back the loan without falling into debt.

Payday loans as a last resort

Scott Hannah, president of the CreditCounsellingSociety of B.C., saysVancity'sprogram is pretty good.Theinterest rate on its short-term loans is much lower than the maximum23 per centmost payday companies impose.

• B.C. slaps limits on payday loans

However, he says payday loans should be a last resort and people in need of quick cash should try alternatives first.

"Something a person might want to look into is whether they are able to approach their employer [for an advance], if that's a possibility. Sometimes it is."

He saysanother option is to approacha creditor.

"If a person has a good credit rating but [is] short oncash, are they able to delay a payment to make up that difference in the short-term?"

Hannah also recommends peoplelook at their budgets and figureout where they can cut costs or make some quick pocket change, like getting rid of an expensive storage space andholding a yard sale.

And if that doesn't work ...

"Sometimes, as hard as it might be, approaching a friend orfamily member can work too. Of course, that can require swallowing your pride, and that's hard for people to do."

In the long-term, however, Hannah says it comes down to people developing critical money skills. He says the payday loan business has burgeoned because people do not have the financial literacy to properlymanage their money.

"A lot of consumers are just getting by, especially in high housing cost marketslike Vancouver andToronto. ... Peopleneed tolearn to mastertheirmoney instead oftheirmoney mastering them."