LatinaLista — Living paycheck to paycheck is scary enough for the millions of people who live at or below the poverty line. Yet, as anyone knows, living such a hand-to-mouth existence doesn’t leave any wiggle room for life’s unexpected surprises — a sudden health crisis, the car breaks down, the rising cost of gas or food, etc.
It’s during these times when people, desperate for money, turn to predatory lenders or payday loans for quick money that always costs more to pay back. Using such loan operators puts a person at risk of never getting out of debt.
One Pittsburgh, Pennsylvania church saw members of it congregation fall prey to these types of inflated loan payback businesses and wanted to create a loan system that let’s people borrow for free.
Dubbed Grace Period, the non profit is a club where members learn how to manage their money and that they don’t need payday loans to get through life’s emergencies.
Imagine that you had a $500 emergency fund.
You had built this fund by saving a little bit each payday.
This money is available to you whenever you need it, but you do not need it all the time, only when emergencies or unexpected expenses happen.
Imagine that you learned that you could put this rainy day fund in a special place that paid you significant money every week that you added to your fund – but, if you ever needed the money right away you could have it and even borrow extra if necessary.
That sounds great right, but you don’t have $500, so what’s the connection?
Well, you don’t have $500 today, but with a special place like that one just described, if you borrowed and immediately started saving for future emergencies you could actually save your way out of the cost of borrowing – creating a completely free loan.
Grace Period links members that already have an emergency fund to members that don’t have one (yet). The goal is that eventually everyone builds an emergency fund and borrowers can earn back the cost of borrowing by repeating the cycle and helping someone else.
Is justice being served when the unprepared spend $800 repaying a loan that covered a $350 car repair, only because to them, saving for a rainy day is seemingly impossible?
Should an industry that targets the undereducated and economically vulnerable remain unchecked by a church that can easily leverage its assets to offer something many times better?
Tony and I started Grace Period in hopes of offering a real alternative to those in Pittsburgh needing small loans. We intentionally created a model which could be easily replicated across the United States, anywhere the problem exists- (which is just about everywhere!).
Dan Krebs, founder of Grace Period