I was flipping through the Pittsburgh City Paper and came across an article about an area non-profit that’s working toward helping people improve their finances.
The organization, Grace Period, helps people break the payday loan cycle and start building up their own savings accounts so unexpected expenses won’t devastate their finances.
From the newspaper article:
Grace Period is structured as a club. Members must have bank accounts, and an account can be set up through the credit union for people who don’t already have one. Those needing to borrow can receive up to $500, at which point they have two options:
1. If they can pay it back within 13 days, they pay no interest at all — essentially borrowing the money for free
2. If they cannot pay the loan back within 13 days, they must come up with a payment plan to repay the loan, and then pay some additional funds into an “emergency fund” for a 12-month period. Most members put $50 into their account every two weeks, Krebs says. That money is then used to make loans to other members, and can be withdrawn by the member as needed.
Love this! I do think it would probably be better for all members to set up emergency funds, not just the ones who can’t repay the loans within 13 days.
The organization believes that if people had at least $500 in savings, then they wouldn’t have to rely on high-interest payday-type loans. They wouldn’t be caught up in a hard-to-break cycle. They could start to gain control of their finances.
I hope more communities see the need for this type of non-profit, and I hope more of these start to spring up all over.
Have you ever been in a situation where you took out a payday loan, or considered it?