It’s Time for Alternatives to Payday Lending

The greatest cause of human trafficking today might surprise you. It’s debt.

Access to a loan that is not designed to be repaid has been a tool to prey on people in poverty around the world. While human trafficking is the most egregious outcome of predatory lending, it’s not the only one.

Close to home, predatory lending is a massive industry. With roughly 20,000 shops nationwide, payday loans rake in nearly $40 billion per year. (That’s almost double the annual revenue of McDonald’s restaurants worldwide!) Payday loans are smaller loans typically used for emergencies or quick cash, but often create long-term entrapment.

Many times, borrowers cannot repay without reborrowing—ensnaring millions in a cycle of debt. With interest rates as high as 500%, CNN reports that four out of five payday loan borrowers reborrow their loan within a month.

Far from a fringe activity, payday lending provides financial services for roughly 12 million adults—that is, 1 in 20 adults—across the United States each year. These kinds of lenders target those in low-income communities.

Why does this matter?

Consumer debt is dangerous, and the consequences are most severe for those closest to poverty. God cares deeply for the widows and the orphans, the lepers and the lame, and all who are oppressed. In Scripture, we see Jesus speak out against individuals and institutions who neglect those in need. We see Jesus elevating the status of the vulnerable and taking time for those whom the rest of the world had passed by.

Following Jesus means that we are called to do the same. To stand up for justice. To cling tightly to mercy. To walk humbly with our God. This includes caring about predatory lending.

I believe we need better options than payday lending in the US. Thankfully, there is a new movement of social entrepreneurs offering alternatives. Here are just a few:

  1. Loanable: Loanable supports borrowers in creating low-interest loans online through friends and family financing. The website invites friends and family to pitch in for small, specific loan requests through a legal agreement. Loanable helps borrowers to pay back their loans on time with an auto-draft repayment system.
  2. LendUp: LendUp offers simple, practical ways to improve credit while providing a secure option to predatory lending. The company’s website features a LendUp ladder, focused on educating borrowers on the best ways to improve their financial health. Not only that, but the LendUp website also shares short video clips on a variety of topics—from understanding your credit report to building your savings. According to their estimates, LendUp has saved their customers roughly $130 million. Endorsed by Forbes and TechCrunch, LendUp “builds technology, credit products and educational experiences” for millions of Americans with poor credit or unpredictable incomes.
  3. Juntos Avanzamos: The Juntos Avanzamos—translated “Together we Advance”—designation acknowledges credit unions that provide financial empowerment opportunities to the Hispanic community. Juntos works to help immigrant borrowers achieve financial independence by offering transparent and affordable services to their customers. Today, there are close to 80 Juntos credit unions across the United States, Puerto Rico, and the District of Columbia.
  4. Able: Able Lending serves the small business sector by offering affordable small business loans. They work with businesses to hire talent, open new locations, and manage cash flow. Able’s loans specialists work with the borrower to help them identify the best loan opportunities and financial services for their business. With products ranging from small business administration loans to lines of credit to short-term loans, Able is a low-interest option for growing businesses.

I’m sure there are many more creative ventures and I’d love to hear about them.

Let’s keep discovering lending opportunities that offer valuable services, transparency, dignity, and hope to those they serve.

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