Payday lending is a major problem in this country. That is why the state of Virginia has created a new program that will offer over 100,000 state employees a new option that they can turn to. The Virginia State Employee Loan Program is a low interest, cost-effective alternative to payday lending and salary advance loans. The Virginia State Employee Assistance Fund and the Virginia Credit Union have come together to create this new alternative.
While the program is still in a pilot form, the program offers small dollar loans, that currently max out at $500, to state government employees. The low interest loans are offered at a much lower interest rate than payday loans, and the maximum interest rate is currently 24.99%. They will be repaid via direct withdrawals from the state employee's paychecks over a six-month period. Also, it can be repaid early as there is no penalty for early repayment. In addition, employees are limited to one outstanding loan from this program at a time and may apply for only up to two loans per 12-month period. Also, very importantly, in order to help keep state employees on sound financial footing in the future, if someone applies for and accepts a loan, they will need to become a member of the Virginia Credit Union and they will also need to complete an online financial fitness course on money management, credit counseling, and/or checkbook management. They may be able to provide debt management assistance.
The results have been promising to date. So far the data from the Virginia State Employee Loan Program shows that if individuals are offered an alternative to high interest rate, predatory payday loans, almost all consumers will take the low interest alternative. Virginia is issuing hundreds of loans per month to state employees. And the loans are being repaid timely. In addition to this low cost option, find other ways to get help with payday loans, including peer to peer lending and credit union salary advance loans.
Other employers, companies, and organizations are also starting to offer their own alternatives. For example, at the same time of this program, other employers and organizations in Virginia are offering similar programs and they are helping to make the case that employer-based partnerships like the Virginia State Employee Loan Program are a viable service to offer their employees with a real consumer demand and positive outcome. For example, Riverside Health System, which is a Newport News-based healthcare organization, has launched its own loan low interest rate program in 2008 to help its employees pay off high-interest rate, short-term loans and it is seeing similar success with its payday alternative. Some organizations are also facilitating the issuance of unsecured personal loans, and have put in place rules and regulations to ensure they are not abused.
Contact your local state office and ask them about the Virginia State Employee Loan Program.
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