New Program aims to provide alternative to high-cost payday lending in Delaware
A new public/private initiative has been launched towards working to improve the lives of people in our communities.
Wilmington Trust, West End Neighborhood House, and other organizations have joined to launch a new loan program that offers an alternative to the high-cost practice known as payday lending.
The new Worker’s Loan Program will provide small, short-term loans at low interest rates, financial education, and referrals to support services, if needed. This stands in contrast to payday loans, which provide short-term financing, often at exorbitant interest rates and with automatic rollovers that can perpetuate indebtedness.
Here’s how payday lending usually works
With payday lending, borrowers typically write a post-dated personal check in the amount of the loan plus a finance fee, in exchange for cash in the amount of the loan. On or after the check date, the lender cashes the check, then pays off the loan and retains the finance fee as compensation for making the loan. Because these loans have such short terms to maturity, the cost of borrowing, expressed as an annual percentage rate (APR), can reach an average of 400%, according to a recent study by the Center for Responsible Lending, a nonprofit research and policy organization. If borrowers are unable to pay the loan at the due date, the loan is often renewed for another term and for an additional fee. This cycle may last for months or even years, sometimes making it nearly impossible for borrowers to get on solid financial footing.
The maximum loan available from the Worker’s Loan Program is $500. Qualified applicants will receive Wilmington Trust’s regular personal loan rate, which currently has an APR of 13.49%. Loans can be paid in a lump sum or a payment plan may be established, whichever fits the applicant’s financial ability.
“One of the main goals of the Worker’s Loan Program is to help individuals to become financially self-sufficient by providing education and teaching responsible borrowing to help break the cycle of chronic poverty,” said Barbara Reed, Director of Housing and Financial Management at West End Neighborhood House.
Hopefully, this program will go a long way towards the goals of helping individuals achieve self-sufficiency, reach and maintain their maximum potential, and live responsibly within their community.
- Delawareans Invited to Talk One-on-One With Their Governor
- Delaware Ranks #9 as a business friendly tax system