THE LOUISVILLE LOAN Club, which will open early this year at a storefront in a poor residential neighborhood in southwest Louisville, Ky., is a new economic justice ministry blessed and supported by Jeff Street Baptist Community at Liberty. The brainchild of members Susan Taylor and Andy Loving, it's a company that will make small loans designed to counter predatory payday lenders. Typical payday lenders offer short-term, unsecured loans at interest rates of up to 400 percent or more per year. Average loans are $250 to $500, but many borrowers are not able to pay back the principal and interest at the end of the first loan; instead, they become trapped in a cycle of loans and fees, eventually paying thousands of dollars.
The Louisville Loan Club will offer loans at an annual percentage rate of 18 percent—and offer a path to breaking the cycle. "Any of us can need a small loan at some point," says Taylor, who will oversee the day-to-day operations of the club. "Surely we can do better for each other than to throw someone in need of a small loan into the proverbial shark pool."
Loving and Taylor are modeling their enterprise in many ways on the Pittsburgh-based Grace Period, a church-started alternative check cashing and cash advance service with a five-year track record, Taylor says, of "offering small loans and helping people learn to save their own emergency funds. They built a model of compassion."