By Regina Varolli
Sunday, May 16, 2010
The Kentucky Domestic Violence Association's microloans are truly micro; between just $200 and $800. But they are interest-free and monitored by Experian and TransUnion, giving borrowers a chance to build their credit profile in the process.
(WOMENSENEWS)--The Kentucky Domestic Violence Association has extended interest-free microloans to 41 women throughout its 15 member organizations since 2009. The loans are pegged to savings accounts that match every dollar saved with two dollars, doubling the financial lift.
While the interest-free loan is truly micro--typically between just $200 and $800 --it can provide a crucial financial boost, enough to help a woman fleeing abuse meet the first month's rent on an apartment or pay for transportation to a new job. At the same time it can protect her from a predatory or "payday" lender that can charge interest rates that go as high as 400 percent, taken annually.
Microloans for battered women are still a rarity.
But what's even more notable about this program, funded by over $200,000 in grants from the Allstate Foundation of Northbrook, Ill., is that survivors are getting their repayments monitored by credit bureaus that usually won't report these types of non-traditional loans.
That means the women not only get crucial cash in hand, their repayments are also helping to generate and improve credit scores, essential for such personal-finance basics as renting an apartment or buying a car.
The safety advocacy group has managed to report their microloans to credit bureaus by working through the Credit Builders Alliance, a 4-year-old Washington-based group assisting the nonprofits that serve low- to moderate-income individuals to build their credit and access conventional financing.
"They did all the heavy lifting," said Mary O'Doherty, economic empowerment director for the Kentucky Domestic Violence Association, based in Frankfort, in a telephone interview.
Vikki Frank is founder and executive director of Credit Builders Alliance.
"What we've learned from working with the Kentucky Domestic Violence Association is that in many domestic-violence households women aren't in control of the finances," Frank said in an interview with Women's eNews at a New York City brasserie. "They often don't have their names on the utilities, mortgage, credit cards or bank accounts. So these credit lines go even further in helping domestic violence survivors to become economically self-sufficient by establishing credit as an asset with accounts in their names."
The Credit Builders Alliance has 100 members that offer microloans. All the loans are reported to Experian, based in Costa Mesa, Calif., and TransUnion of Chicago, two of the three major credit bureaus. Equifax, based in Atlanta, does not work with the Credit Builders Alliance.
So far, Kentucky Domestic Violence Association is the only member of the alliance that acts as a lender to women escaping abusive homes.
One other member, Building Security Through Assets and Financial Education in Helena, Mont., arranges loans for women escaping domestic violence by referring them to local credit unions. So far, however, that project has only extended one micro loan since 2004.
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