Goodbye Holiday Loans? Not so Fast!
by Bo McDonald
Not too long ago, I read a lively exchange on a credit union blog about the place of holiday loans in the market. There were a range of opinions. Some wrote of a belief that holiday loans are outdated. Others questioned if the loans are bad for members because it encourages them to take on more debt.
In regards to holiday loans, I won’t bash them. Several of the credit unions we work with offer a holiday loan in one shape, form, or fashion. In fact, I’ll be as bold as to say that I don’t think they’re outdated at all! It’s like saying a telephone is outdated. Your rotary phone may be a thing of the past, but the iPhone certainly isn’t obsolete. The technology and use of the product have evolved. Credit unions can change with the times too. For example, ElecTel Cooperative FCU in Raleigh N.C. offered a “Green Wednesday” loan for its members. To help members pay for the many deals offered on Black Friday and Cyber Monday, the traditional holiday loan was repackaged and renamed to meet a need of many members. Sure it’s nothing more than a signature loan that we offer throughout the year— but it’s a timely promotion.
Are we driving our members deeper into debt? If we’re not there to fill the need, they’re going to look elsewhere. And elsewhere probably means a predatory lender, where the member will be paying interest rates in the hundreds. There’s also the likelihood they’ll become entangled in the nasty web of payday loans. Our first preference for members is to take advantage of skip-a-pay programs, giving them several hundred extra dollars to fulfill holiday needs before taking on any additional debt.
