Yes, there are alternatives to payday loans out there. In their majestic benevolence, some banks and credit unions are now offering short term loan products to save borrowers from those predatory payday lenders.

So I decided to research these loan products a little bit and see what made them so much better. First off, most of their websites require you to call in to receive their rates, they are not posted on their site. But I did find some that explained their rates quite clearly, and the results were shocking.

One credit union offers loans from $300-$1,500. Loans of $500 or less must be paid back within 30 days. Loans of $500-$1000 must be paid back within 60 days. Loans of $1,000 and more must be paid back within 90 days.

The APR on these loans is 18% which means .05% daily. At first glance you might say that this sounds like a pretty sweet deal. I could get a $1,500 loan and pay it back in a week and it would only cost me seventy five cents a day, or about $5 for the loan after a week.

Oh but wait, there's that minor part that says all loans for any amount have a $35 fee. In other words, borrow their minimum of $300 for just 10 days. That's only $1.50 in interest, and $35 in fees. So you pay back $336.50 for the loan after 10 days.

Now lets do some math. $36.50 for $300 is 12.16% of the principal. And 12.16% divided by 10 days is the same as 1.216% in interest per day. Multiply that by 365 days in a year and we have...444% APR! Astonishing!

Now what if you only borrowed that $300 for 5 days? You pay $0.75 in interest and $35 in the fee. That's $35.75 for $300, or 11.92% of the principal. Divided by 5 days is 2.38% per day, and multiplied by 365 days is...869.9% APR!

Now credit unions get around payday loan laws very cleverly. Their $35 fee does not technically count as interest because 1) it is not dependent on loan amount and 2) it is not dependent on time. So they won't make a lot of money on people borrowing large amounts and keeping them out for a long time. But they will make a lot of money on people taking out smaller loans.

Oh, by the way, the average payday loan amount is between $300-$400, so credit unions are charging those people exactly the same amount as payday lenders for loans that size. Only creidt unions call their costs "fees" instead of "interest." And amazingly lawmakers don't seem to care...

So there are alternatives to payday loans out there. Why don't you go try them out. Go get a $300 loan from a credit union for 10 days and get a $300 loan from a payday lender for 10 days. One will cost you about $36.50, the other about $32.13. In case you're wondering, $36.50 > $32.13.