As COVID-19 declines and federal and state stimulus payments dry up, debt continues to rise for many as they return to work amid rising prices and stagnant wages.
Laddie Cross, a business and loan specialist for the Southeast Economic Development Fund Inc. (SEED $), is a retired banker who said many might be tempted to turn to a payday loan for a quick fix that, according to them, will pass them to the next paycheck. .
But, in states like Missouri, which lightly regulates predatory lenders compared to other states, those borrowers could face charges equivalent to 463% for short-term loans.
Late last summer, SEED $ began offering a program that offers borrowers an alternative to predatory lenders. Launched in July 2020, the Community Loan Center of Southeast Missouri (CLC) is a low-cost employer-sponsored loan program offered by participating employers in the East Missouri Action Agency (EMAA) service area. In fact, EMAA is one of the participating employers.
“Someone may have a car repair they don’t have money for at the time, or someone needs to take their family on vacation and wants the extra funds,” Cross said. . “Some employees have renewed their loans, paying off the original loan and taking out another. “
Cross said the interest rate is a fraction of that charged by payday loan companies on a loan of up to $ 1,000, and that the loan is expected to be paid off within a year. The loan amount is determined in part by the borrower’s salary – it cannot exceed 50% of a monthly salary, so if someone earns $ 2,000 per month, they can borrow $ 1,000.