Why We Need the Microloan Program
Predatory lending has been identified as a major barrier to escaping poverty for low-income individuals. When individuals need a small loan to meet an unexpected expense, there are few options. Often, the only place for people to go is to a lender that will charge high interest rates or hold the individuals car title as collateral. Many Society of Saint Vincent de Paul conferences have been contacted because individuals can no longer pay their rent or purchase food because they owe large amounts to lenders. Some have even lost their cars, their only means of transportation to their jobs, because of a predatory loan. Once trapped in a bad loan, it can take years to escape, with many individuals taking out additional loans to pay the first one back. There is very little legal recourse, as most of these businesses are, in fact, operating within the law. Additionally, many low income individuals are ‘unbanked’ or unable to open a bank account. This makes it impossible for a person to transition from poverty to middle class.
After discussion with Saint Vincent de Paul members and community members, we began to search for a way to prevent individuals from even becoming involved with high interest loans or car title loans and also connect individuals with a bank account. If individuals had access to a small loan with low interest, their expenses could be met without falling into poverty.
After substantial research, it was discovered that Saint Vincent de Paul groups had started low-interest loan programs in Belleville, IL, a suburb of St. Louis, MO, Indianapolis, IN, and Austin, TX. These programs provided us with guidance as we designed this project. Our first partner is True Core Credit Union in Newark Ohio. Since that time, partnerships have been established with Metro Federal Credit Union in Franklin County, Chivaho Federal Credit Union in Ross County, CME Federal Credit Union in Delaware and Fairfield Counties, CES Credit Union in Knox County, and Coshocton Federal Credit Union in Coshocton County.