Kentucky Nonprofits Provide Payday Loan Alternatives - OppLoans

Kentucky Nonprofits Provide Payday Loan Alternatives - OppLoans Kentucky Nonprofits Provide Payday Loan Alternatives Kentucky Nonprofits Provide Payday Loan AlternativesInside Subprime: October 7, 2019By Lindsay FrankelIn rural areas of eastern Kentucky, choices for banking are limited. 19.6 percent of Kentucky residents are underbanked according to the Federal Deposit Insurance Corporation. Some costly alternative to traditional banking like payday loans and title loans can have serious financial implications for low-income Kentucky residents, something local nonprofits are working to prevent.A Hazard, Kentucky-based nonprofit organization established by the Housing Development Alliance, provides low-interest microloans to residents in areas of southeastern Kentucky. The goal is to help financially burdened individuals bridge gaps in income, erase higher interest debts, and get the education they need to achieve financial stability.“I think a lot of people are making a [financial] decision based on short-term needs and hope they’ll figure something out for the long term,” said Mae Humiston, the CDFI director for the organization. “One-time emergencies can have long-lasting impact if they don’t have access to affordable credit.”When people lack options for credit, they often turn to payday loans in Kentucky. A payday loan is a short-term loan intended to be repaid out of the borrower’s subsequent paycheck. But payday loans in Kentucky carry an average APR of 469 percent, according to Pew Charitable Trusts. With interest rates that high, it can be difficult for borrowers to pay back these loans on time, which can lead to insurmountable debt. That’s why the program hopes to provide a safer alternative to folks who need credit.“The people who pay the most for credit are the people who most can’t afford it, and we are condemning them to a lifetime of debt, and we need to think about how to restructure the system so this doesn’t need to happen,” Humiston said. She added that predatory lending has flourished in recent years due to bank closures in rural area s, and even when banking services are available, they often don’t meet the needs of people with poor credit.Of the program’s five loan products, their “credit rescue” loan is most utilized by borrowers. Intended to help residents pay off high-interest credit card debt, the loan also includes financial counseling intended to help people develop smarter money behaviors.Many of the clients aren’t in debt due to being irresponsible, however. Some people with significant debt have steady jobs and make their payments on time, but exorbitant interest rates keep them trapped in debt, said Humiston.Learn more about payday loans, scams, and cash advances by checking out our city and state financial guides, including  Chicago, Illinois, Florida, and Texas.Visit OppLoans on YouTube | Facebook | Twitter | LinkedIn