A new loan program rescues people from payday lenders – permanently – and puts them on the path to healthy credit and financial success. The Lighten Up loan program is a unique partnership between the Community Foundation of Greater Birmingham, Gateway Financial Freedom, and Alabama Central Credit Union.
Lighten Up participants receive free financial counseling, a comprehensive credit review, and budget plan from Gateway Financial Freedom, located at Gateway’s Southside office. Then Alabama Central Credit Union grants a loan that pays off their existing payday loans. Participants repay the credit union’s loan over 12 months with affordable monthly payments, which helps rebuild their credit history and also gives them membership in the credit union.
“This is not a quick fix that will leave someone vulnerable all over again,” says Philip Blankenship, President and CEO of Alabama Central Credit Union. “This program removes the burden of payday loans and gives the person a long-term relationship with a trustworthy financial institution, one that will continue to serve them in years to come.”
Doug Horst, Gateway Financial Freedom’s Program Manager, witnesses the tremendous relief Lighten Up provides to families, permanently stopping the dangerous cycle of payday loans.
“The Lighten Up program provides an affordable loan option through an ethical lender, as well as financial counseling every step of the way. With our continuous support, people don’t fall into the payday loan trap again,” he says.
The program’s partners also work tirelessly for legislative reforms.
“We are battling predatory lenders from every angle, because Alabama families deserve reliable financial help,” Horst says.
Dana Malone knows first-hand how the payday loan trap works. A lifelong resident of Birmingham, Malone was one of the first Lighten Up participants.
“Life happens, and sometimes you need money fast,” Malone says. “Payday lenders make it easy to get money quickly, and you have every intention of paying it back right away. But then you realize how hard that is because of the high interest they’re charging. It’s like running a losing race.”
Through the Lighten Up program, her payday loans are gone, she’s saving $130 each month and her credit score is steadily improving.
According to the Alabama Appleseed Center for Law & Justice, payday lenders can legally charge as much as 456 percent APR, which keeps many Alabama residents trapped in a never-ending cycle of debt. In contrast, Lighten Up participants pay only 15 percent APR, and receive their share of membership in Alabama Central Credit Union at no cost. Additionally, they have access to all the credit union’s other products, including checking accounts and auto loans for first-time buyers.
The Community Foundation, the state’s largest foundation, has been actively involved in supporting advocacy efforts for predatory lending reform in the state legislature. The Foundation also believes that borrowers deserve solutions that lead to self-sufficiency and financial health, not entrapment in a cycle of repetitive borrowing and crushing debt. After researching alternative models, the Community Foundation worked with Gateway and Alabama Central Credit Union to develop the Lighten Up loan program and granted funding for the launch of the program.
Currently, Lighten Up is available in the Birmingham metro area, but plans are underway to expand it to the Tuscaloosa and Mobile markets.
President Barack Obama pushed the predatory lending struggle into the national spotlight when he spoke in Birmingham last May, saying, “You take out a $500 loan at the rates that they’re charging in these payday loans – some cases 450 percent interest – you wind up paying more than $1,000 in interest and fees on the $500 that you borrowed.”
To schedule a financial counseling appointment and seek qualification for the Lighten Up loan program, call Gateway at 205.251.1572. Choose option 0, then option 2.