As the epidemic continues to spread, organizations are stepping in to provide alternatives to the payday loan cycle.

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 As the pandemic spreads, tens of millions of people struggle to make ends meet. Many of them are among the millions of Americans who rely on payday loans advances to help them get by IPass.

Even though they provide quick cash, debtors are entangled in a vicious cycle from which some cannot break free.

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There is no shortage of options for anyone in need of some quick cash, and getting a payday loan isn’t tricky: in most cases, all you need is a photo ID, your social security number, and proof of your income.

On the other hand, interest rates create a vicious cycle that is difficult to break out of. However, some organizations are dedicated to assisting people in doing just that.

The cost of a $200 loan could cost more than $900 if the annual interest rate is as high as 459.

“That, in my opinion, embodies the definition of predatory behavior. “They win when you lose,” said Andy Posner, founder, and CEO of Capital Good Fund, a nonprofit community development financial institution certified by the United States Treasury Department.

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According to its website, the Capital Good Fund “assists people in repairing their financial situations” by providing small loans and personalized financial and health coaching in Rhode Island, Florida, Massachusetts, and Delaware.

Memphis-based Metro Ideas Project, an independent urban policy research organization based in Chattanooga, has determined that Shelby County has the state’s highest concentration of payday lenders.

According to the firm, there are more than 230 payday lenders in Shelby County, nearly double the 109 payday lenders found in Davidson County.

According to Posner, during a Zoom interview, “in order for them to profit, you have to be unable to afford the loan as agreed in the contract.” When it comes to lending, the only way the lender makes money is when the borrower ends up in a worse financial position than when they began.

In Memphis, payday loans are used by tens of thousands of people. According to the Metro Ideas Project, those who are most likely to have used a payday loan are those who do not have a four-year college degree, renters, African Americans, and those who earn less than $40,000 per year.

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According to the Metro Ideas Project and the Pew Charitable Trusts, although the loans are advertised for emergency spending, 70 percent of borrowers use them for things like car and mortgage payments and credit card payments, utility bills, food, and food rent, among other things.

Posner asserted that this, combined with sky-high interest rates, amounts to inequity.

“All of these things contribute to what many people refer to as a poverty tax, which means that Black, brown, indigenous, and low-income communities pay more for something that other people don’t have to pay for.

That is one of the reasons why Posner established the Capital Good Fund.

According to him, “I made the decision to start an organization that would provide alternatives that would focus on marginalized communities, and it has grown since then.”

According to the bank’s website, Hope Credit Union, a Black-owned bank with branches in five southern states, including Arkansas and Mississippi, is another community development financial institution that has been certified by the United States Treasury.

According to April Branch, manager of the company’s Ridgeway Branch in Memphis, “a lot of people are living from day to day and aren’t thinking about the long term.”

“A lot of people find themselves trapped in the cycle of payday lending, and they believe they will never be able to break free,” Branch explained.

The loans offered by Hope Credit Union are intended to assist people in rebuilding their credit and saving, which is essential in breaking the cycle of poverty in many communities. “As opposed to payday lending, where they’re just going to try to get you another loan to cover that loan,” Branch said of the payday lending industry.

After being asked why it would be essential to break the cycle of poverty for Black people, Branch (who is Black) responded that building generational wealth is a major factor in achieving that goal.

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“Once again, I believe it is critical that we begin to utilize our financial resources and identify ways in which we can contribute to the creation of generational wealth.”

Branch recalled assisting a man in refinancing a high-interest car loan for him to save money instead. She stated that the man had an interest rate of 18 percent. After the bank refinanced his loan, he was able to start putting money aside for retirement.

My goal is to break that cycle and help them gain a better perspective on things. Many people believe they only have $5 (and) that this is insufficient to save, but you have to start somewhere.”

As a result, if you develop the habit of saving early on, you will be more likely to do so in the future. When you face financial difficulties or unexpected expenses, you will have money saved up that you can use rather than resort to payday loans.

Consumer Financial Services Association of America stated FOX13 on behalf of the Tennessee Consumer Finance Association, which is described as “representing the licensed consumer financial services industry serving Tennessee consumers.” A spokesperson for the organization said the statement was issued on behalf of the association.

Consumer financial services regulators’ mission is to ensure that all consumers have access to cost-effective, transparent financial and credit services and options when they are in need. ” The statement stated that “as community-based providers, we play a vital role in the lives and livelihoods of the millions of consumers and communities who are underserved, overlooked, or left behind by more traditional financial institutions, assisting in enabling and empowering financial inclusion and stability.”

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