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Written by Cyndie Martini
on October 27, 2020

Payday loans can have APRs as high as 390%, putting borrowers in a cycle of borrowing to pay back loans. Bank of America's product, called 'Balance Assist', has rates similar to that of most credit cards and nowhere close to what is expected from a payday loan. 

Customers can borrow from $100 to $500 in $100 increments. The fee is $5 and the loan must be paid back in three monthly installments. The APR on these loans comes to about 29.76% on a $100 loan and 5.99% on a $500 loan. One drawback for anyone wanting to switch from traditional payday loans to Bank of America's 'Balance Assist' loans is that it is only available to BoA customers. To qualify, customers must have a BoA checking account that has been open for at least one year.

Payday lenders often require borrowers to have a checking account, just as BoA requires its Balance Assist customers to have a checking account. BoA's product may help some people steer away from payday loans, title loans, and overdraft fees. 

BoA's idea isn't a new one. Credit Unions have offered similar products for years. NCUA started the Payday Alternative Loan (PAL) program for federal credit unions. Rates were as high as 28%, which is in line with BoA's offering. PAL also applications fees. PALs are paid back over 12 months. This type of loan is similar to a high rate credit card but with rates still far lower than a payday loan. Unlike BoA's loan offering, PAL loans are available immediately after someone becomes a credit union member.

Wescom Central Credit Union launched 'Quick Assist' in 2019. This is actually a zero-interest loan available to members with accounts that are at least 90 days old that have $400 per month in direct deposits. Loan amounts range from $200 to $500.

Balance Assist will be launching in January.

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