Financial stress is devastating. It is toxic physically and detrimental to children, marriages, and work performance. By planning now, you can get through this hard time and prepare for life after the COVID crisis. Avoid predatory lenders. There are resources available to avoid these traps. What is predatory lending? What is the true cost?
Avoid Predatory Lenders, Instead, Use:
Not-for-profit credit unions
Many not-for-profit credit unions are offering COVID crisis loans for consumers. One big difference between a bank and a credit union is that banks are for-profit ($$$$) and credit unions are NOT-FOR-PROFIT (looking out for you). Credit unions have a philosophy of people helping people. They even have social justice; mission-guided international operating principles like Rotary and Boy Scouts. Each credit union’s products are different, designed to meet the specific needs of the community it serves.
How Credit Unions Help
- Skip-a-payment on loans (many without fees)
- Payment deferrals (many for 60 days) & loan modifications
- Refinancing high-interest auto loans from for-profit banks and predatory lenders to lower rates & deferring payments
- Eliminating high-interest credit cards, lowering & deferring payments
Community Development Financial Institutions (CDFIs)
Think miracle makers that you’ve never heard about even though they are changing lives. These lenders earned a special designation “CDFI” from the Treasury because they exist to make the world a better place, very different from all other Financial Institutions. They lend to low-Income people and businesses in distressed communities. As a result, they have access to grant money to make loans no other Institutions are willing to make. Yes, some credit unions are CDFIs (double the do-good!).
The FYI on CDFIs
- Credit unions certified as CDFIs are most likely to offer loans to credit invisible people with low or no credit scores.
- Many CDFIs will lend to immigrants and non-U.S. citizens.
- CDFIs are most likely to refinance autos above 100% LTV to eliminate predatory car loans and save consumers money.
- CDFIs are more likely to lend to consumers with existing debt. This is a bigger barrier to loans for low-income people.
Seek help from family and friends.
If all else fails, reach out to your family and friends for assistance. Using a payday lender may seem like a quick solution, but in the long run, it can make your future financial goals harder to achieve.
DISCLOSURE: The authors of this document unlock opportunities for not-for-profit credit unions to change lives. CU Strategic Planning’s staff are consumer advocates, designing products for credit unions to provide to vulnerable populations. Its work through credit unions reduces poverty and increases access to opportunity. As the COVID financial crisis unfolded, CU Strategic Planning’s staff decided to use their research and knowledge to help people struggling to get by finding solid ground. As a note on liability, this is not professional advice, nor does it provide legal or accounting guidance to consumers. It is merely a document with practical tips to help good people weather the storm.