It’s not often that a financial institution is a protagonist. But in Savannah, Georgia Heritage Federal Credit Union came through like a hero this year, working with Step Up to create a new loan product aimed at low-wage employees.
More than 60 percent of Chatham County residents have sub-prime credit; thousands of residents remain stuck in a cash-based economy (albeit some by choice, others due to mistakes or, yes, bad choices) and at least 10 percent are completely unbanked. Many — truly untold numbers, since there is no straightforward way to count these individuals — are working full or part-time. For several years, Step Up staff and our partners have tried to identify ways to connect our working poor, some barely a paycheck away from poverty, to public benefits they’re eligible to receive that effectively boost their earnings. A significant opportunity has existed among thousands of wage-earners who find themselves in need of a small-dollar loan but who don’t have credit or whose bad credit translates into exorbitant interest rates.
When a life emergency or unanticipated need pops up, most employees ask for payroll advances, borrow from retirement plans, or turn to the unregulated car title loan industry.
Step Up has urged banks and credit unions to consider offering a safe loan product through area employers. Georgia Heritage recently stepped up. Employers can now offer through the credit union loans of $300-$1500 to those who have been employed in good standing at their companies for 6 months or more. No questions asked, no fees, and monthly payments are determined by the credit union and borrower, with amounts processed through payroll deduction. Credit scores are not part of the determination process and payments are recorded at credit bureaus so these employees can build a positive credit record. Further, once the loan is repaid, the auto deductions continue with payments going to the employee’s savings account. They can easily opt out of course but once individuals get accustomed to not having that $50 or $100 available, they typically keep it up, and in this case building savings.
Chatham Area Transit, Hospice Savannah, and Chatham County are employers who are on board, or just about, with the Life Line Loan. Step Up will be gathering data to document what works– or doesn’t– about this loan product. But we know that it won’t bury in more debt those who can least afford it, like the car title loan.
To learn more about our Life Line Loan, contact Robyn at email@example.com