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. LoanWell: LoanWell 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.

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.


  1. Andrew
    September 17, 2018

    Your efforts to help those in the cycle of debt are very needed. Not only do we need an economic understanding of this issue, we need to understand how human nature works. I lived in a foreign country where it was very difficult for people to get loans from banks. But they could buy an appliance, like a television, on same as cash deals and monthly payments. So people who wanted a loan would buy the television on a payment plan then sell the television for a reduced amount to someone else. This is the way they would get their immediate cash.

    I say this to note that people who want cash now will find a way to get it, payday loans or not. The reason payday loan companies locate in poor neighborhoods is because that is where they will do the most business, the same reason golf courses tend to be in wealthier suburbs. People need to change their behavior to fix their financial problems.

    The first company, Loanwell, sounds scary to me. Lending money to friends and family can do a lot to ruin relationships- see Dave Ramsey’s teachings. The next two may offer practical solutions. However, if the Juntos Avanzamos designation is so good, why just Hispanic people? If it truly works then it should be able to work for everyone. Wise financial principles work for all races and ethnicities. If this is one of them then let’s all get in on the action.
    Thanks for addressing this issue.

    1. Peter Greer
      September 19, 2018

      Thanks for sharing, Andrew! Completely agree that none of these alternatives will ever fully fix the manipulation that happens in finance. Our hope is that this blog post shows that payday loans are not the only option, and we’ve only scratched the surface of alternatives. We applaud these entrepreneurs for trying to create solutions that focus on the well-being of the people they serve.


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