People on the economic margins in the united states are often unable to access loans from banks and credit unions when they encounter an unexpected expense.
According to the Federal Reserve, in 2023, more than 35 percent of the U.S. population would not be able to cover a $400 emergency expense with cash. People without the funds to cover emergency expenses are often forced to turn to payday lenders who charge exorbitant interest rates—sometimes more than 650 percent per year. These loans, by design, are nearly impossible to repay, often resulting in borrowers being pushed further and further into poverty.
THE BETTER ALTERNATIVE TO PAYDAY LOANS
The Capital Good Fund offers an alternative to payday lending, such as loans for people facing unplanned expenses like auto repairs and medical bills. The fund offers low-interest loans for homeowners to weatherize their homes to make them more energy-efficient.
They also offer loans to cover legal and form-filing fees to individuals navigating their way through the U.S. immigration process. Crucially, the Capital Good Fund offers low-cost coaching that helps people improve their financial lives through budgeting, banking, and savings, among other things.
Loans from the Capital Good Fund have a high rate of repayment; The Center for High Impact Philanthropy reported that it is about 97 percent. The loans are designed to be affordable and manageable, in part because the Capital Good Fund raises grant dollars to forgive as much as 30 percent of their loans.
CAPITAL GOOD FUND’S IMPACT ILLUSTRATED
The Capital Good Fund works to help borrowers succeed financially, rather than taking advantage of them as payday lenders often do. Read on to meet two Capital Good Fund clients.
Ana Marcia is an immigrant from Honduras. While working with her attorney to receive employment authorization as part of the immigration process, she learned that the cost for her legal and paperwork filing fees would be more than $5,000. She went to a bank and applied for a loan, but she was denied because she had no credit history. She heard of the Capital Good Fund from a relative and knew that they make small loans to people in her situation. She was able to get a $5,000 immigration loan. Several months after receiving the loan, her employment authorization was approved. Ana was able to repay the loan and is now a homeowner who runs her own housekeeping business out of her home.
Nikki had struggled with managing her finances for a long time. She signed up for financial coaching from the Capital Good Fund. Through her work with her financial coach, Patricia, she gained financial knowledge and access to resources so that she could make better financial decisions. This has helped her take better care of herself and her children. Her advice for people considering financial coaching is, “Go for it. Don’t wait. Don’t hesitate. Get your body in here. Get yourself a coach. And let them show you the way. Let them guide you…You can change your life if you want to.”
A HOPEFUL ALTERNATIVE
Low-income individuals and households in the United States are often unable to get personal loans from banks for small, unplanned expenses. In many situations, these individuals are forced to take out payday loans from predatory lenders.
People with limited or no credit history can turn to the Capital Good Fund as an alternative to payday loans. The Capital Good Fund seeks to make loans with reasonable interest rates that can be repaid. It also offers low-cost financial coaching to help empower borrowers and give them the resources and knowledge they need to start improving their credit history, eradicating poverty, and building wealth.