The Citizens Advice Bureau (CAB) dealt with an average of 4,760 personal debt problems each day during 2008. Literally millions of people are struggling to balance their income and expenditure each month, creating a huge demand for both credit union loans and payday loans. Which of these provides the better option for those struggling with money problems?

Lending Criteria for Personal Loans

The lending criteria are completely different for payday loans and credit union personal loans. A payday loan is only available for those in work. Credit union personal loans are available to low income families, but are instead based on affordability. An assessment of income and expenditure figures will be performed to see if borrowing money is in the members' best interests.

Payday Loans Charge a High APR

The APR on payday loans is a usury 1000% per annum. This means that payday loans charge customers the equivalent of £20 for every £100 borrowed each month. The maximum a credit union can charge for a personal loan is only £2 for every £100 borrowed each month. Many credit unions charge far more favourable rates to their members.