Local Nonprofit Offers Alternative to Tennessee Payday Loans
By Lindsay Frankel
A local nonprofit is offering low-interest loans in an effort to combat predatory lending in Tennessee. Established by a Sewanee alumnus in 2018, the nonprofits aims to provide access to credit for the unbanked.
According to a report from the Metro Ideas Project, Tennessee has the most predatory lenders of any state, with more than 1,200 storefronts across the counties. And these lenders target vulnerable communities; payday loan use is more common among low-income earners and African Americans.
The average interest rate on a Tennessee payday loan is 426 percent, according to the most recent data from Pew Charitable Trusts. The high interest rates make it difficult for people living paycheck to paycheck to get out of debt. In fact, about 80 percent of payday loans get rolled over or renewed, according to the Consumer Financial Protection Bureau.
The organization assesses borrowers based on their employment and their ability to make loan payments, rather than their credit scores. The nonprofit also assists borrowers by teaching them healthy budgeting and spending habits in required classes. The ultimate goal is to increase financial literacy skills among Tennessee residents.
The organization helped its first client pay off a $1,500 title loan. After making $300 payments for 11 months, there was only an $80 reduction in the principal. And those payments meant the borrower was unable to afford needed repairs on her car. The nonprofit repaid the loan, charging the client only nine percent interest and helping her get ahead of her debt.
Learn more about payday loans, scams, and cash advances by checking out our city and state financial guides, including Tennessee, Chattanooga, Clarksville, Knoxville, Memphis, Murfreesboro, Nashville, Smyrna, Chicago, Illinois, Florida, Texas, and more.