Affordable Alternatives to Predatory Loans

Last updated on February 23, 2022

If you are struggling to make ends meet or pay for an emergency, this guide can help you with safe and affordable options to high-cost loans. It includes ways to lower your bills and find other sources of one-time income, as well as lower-cost loans. Most of these options do not require you to take on more debt.

OPTION 1:
GET HELP
LOWERING BILLS

OPTION 2:
ADDITIONAL INCOME SOURCES

OPTION 3:
LOWER-COST
LOANS

OPTION 1: GET HELP LOWERING BILLS

There are many ways to lower your expenses or debts. You may be able to negotiate with your creditors to lower what you owe. Most companies have programs to help customers experiencing COVID-related hardship. Tell your creditors and other companies to whom you owe money if you are experiencing a COVID hardship.

Couple talking with loan officer

TIP! Prioritize Essential Expenses First

Pay for essential needs before anything else. Essentials include shelter (mortgage or rent), food, and utilities. Before an unpaid bill can be reported to the credit bureaus, which would harm your credit score, it must be at least 30 days late. A single late payment fee is preferable to a high-cost loan, which will cost you much more in fees. If you are uncertain about which option might be preferable, you can always call Capital Good Fund’s financial coaching hotline at 866-584-3651.

Housing

Homeowners: If you are struggling financially, consider obtaining a COVID forbearance, which enables you to postpone paying your mortgage. Without your monthly mortgage expense, you will be better able to pay for your other expenses. The easiest way to obtain a COVID forbearance is to apply on your mortgage servicer’s website. Alternatively,  you can call them and ask for a “COVID forbearance.” If you have a COVID forbearance already that has or is close to expiring, visit your mortgage servicer’s website to apply for an extension or call your servicer.

If you have a complicated situation or are encountering obstacles, find a housing counselor near you. Call 888-995-HOPE (4673) to be connected to free, comprehensive, foreclosure assistance 24/7.

Renters: Obtaining rental assistance can take a lot of pressure off your overall finances. Information about available rental assistance options and applications is available at IllinoisRentalAssistance.org and Housing Action Illinois. Another site, rentervention.com, focuses on Chicago residents, but can assist any Illinois resident. Check the Consumer Financial Protection Bureau’s search tool for more local and County rental assistance programs across Illinois. If you’re being threatened with eviction, visit EvictionHelpIllinois.org for free legal assistance.

Housing Counseling: Housing counselors can provide advice on buying a home, renting, loan defaults, foreclosures, and credit issues. Many housing counseling organizations do financial wellness education at no cost to the participant. Local Chicago examples are Spanish Coalition for Housing and Chicago Urban League. Check IllinoisHousingHelp.org and sign up for email alerts to learn when the Illinois mortgage assistance programs are open.

Tip! Free and Discounted Essentials

Many charities provide free food, free clothing, and other essentials. Catholic Charities locations across Illinois offer assistance regardless of your religion. A financial coach can also help direct you to resources.

OPTION 2: ADDITIONAL INCOME SOURCES

Many people turn to a high-cost loan for a large one-time expense. This section includes ways to access additional income without increasing your debts. Before turning to a loan, consider these sources of potential income.

woman saying "Yes!"

Tax Refunds/Credits and Stimulus Checks

You could be eligible for thousands of dollars in tax refunds by filing your taxes. Even if you don’t normally file taxes, you can still file. There is no penalty for filing late if you don’t owe the IRS any money. File as soon as possible to get your refund. Most programs to help people file taxes for free are available from January to October.

If you received monthly, advance payments of your Child Tax Credit in 2021, you are probably eligible for the Child Tax Credit in 2022, which you can receive by filing your 2021 income taxes. If you did not enroll in the monthly advance payments of the Child Tax Credit, you can still claim the full amount that you qualify for by filing your 2021 income taxes.

If you haven’t received one or more stimulus checks that were issued in 2020-2021, you may claim the Recovery Rebate Credit on your taxes to receive it. Many low-income people are also eligible to receive money from the Earned Income Tax Credit (EITC). Learn if you are eligible for the EITC.

Filing your current year taxes online and using a bank account number for direct deposit will help you get the money much more quickly. If you didn’t file taxes in the last two years but think you might be eligible for these tax credits, you can still file a paper return for those years to receive your past refunds.

  • Many Americans are eligible for free, online tax-preparation services.
  • Visit GetMyPaymentIL.org to learn more about how to file your taxes for free and get your Recovery Rebate Credit. They have a hotline (888-553-9777) for people without computer access or more complicated tax questions.

In Chicago, Ladder Up offers free tax assistance to eligible families. Ladder Up also has pro bono attorneys available for more complicated tax situations.

OPTION 3: LOWER-COST LOANS

If you have taken all possible steps and still need help, you should consider a lower-cost, short-term loan. Here are some affordable loan options—all of which charge 36% annual percentage rate (APR) or less.

woman handing money

Your Bank

Visit your bank’s website or call to find out whether they offer emergency loans or loans specifically tailored to those experiencing a COVID hardship. If you don’t have a bank account, visit Bank On Chicago if you live in Chicago. If you live outside Chicago, visit Bank On Illinois. A financial coach can also assist you with opening a bank account.

With a Bank On certified account, you will not be charged overdraft fees, but some BankOn accounts lack certain account features – like access to affordable loans – that are available only with a bank’s other accounts. Capital One no longer charges overdraft or non-sufficient fund fees on any of its accounts. Not a Bank On account, PNC’s Virtual Wallet account has a feature called Low-Cash Mode that gives customers more time to fund their account to avoid an overdraft situation and, for each transaction that would overdraw the account, allows customers to elect whether the bank should clear the payment or reject it.

Bank Loans

CIBC Bank has an affordable (12.45%  APR) personal loan called the EasyPath Personal Loan. Even if you are not a CIBC customer, you can apply for the loan by visiting one of CIBC’s branches.

Huntington Bank offers a line of credit to eligible account-holders called Standby Cash. The line of credit is up to $1,000 and is interest- and fee-free if the customer enrolls in automatic payback of the loan.

US Bank offers personal loans to both customers and non-customers who have a minimum credit score of 660. The interest rate ranges from 5.99% to 18.49% APR.

Tip! Avoid Extravagances

Buy Now, Pay Later is an increasingly popular option for consumers to buy luxury items and other extravagances. There are significant financial risks associated with doing this. Proceed with caution.

Watch Out for Scams!

Scam artists are always looking for ways to cheat you, but COVID-relief programs have triggered an avalanche of scams and rip-offs.

  • If you receive a call or text from someone you don’t know about COVID relief, Social Security, student loans, loan forgiveness, car warranties, or other benefits, there is a high probability the caller is a scammer. Look up the number for the company or agency on your own and contact them directly if you are concerned about whether the call is legitimate.
  • Emails that want you to click on a link, open an attachment, or provide personal information are highly risky.
  • Beware of any company offering “credit repair,” “debt management,” or “debt settlement.” These types of services are frequently rip-offs.

For more information about scams, visit the Consumer Financial Protection Bureau’s website.

Prefer Talking to a Live Person? Ask a Financial Coach.

Capital Good Fund’s financial coaching hotline provides one-on-one financial advice to any Illinois resident. Starting at $15 per month, the nonprofit can create a plan with you and can advocate on your behalf with creditors. They also offer a credit-builder program for $5 per month. Call 866-584-3651 (English or Spanish)

The City of Aurora’s Financial Empowerment Center provides free, high-quality, one-on-one financial counseling to low-and moderate-income residents of the Aurora region. Learn more.

Man getting advice

Acknowledgments

This resource guide is produced in partnership with New America Chicago, Woodstock Institute, and Financial Inclusion for All Illinois.

Special thanks to all the hardworking nonprofits, socially-conscious lenders, and community partners who are helping restore wealth in our communities. Your work is so important! Thanks also to Jane Doyle, Brent Adams, Amy Eisenstein, Vanessa Rangel, Gordon Mayer, Meegan Dugan Adell, Bob Reddy, Joe Wilkes, LuLin McArthur, and Lauren Monaco Grossman for their work on this project.

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