While most car buyers will choose to finance their cars through traditional lenders, including dealerships and online lending agencies, there is a small percentage of the population that will receive loans from nonprofit agencies like Ways to Work in Milwaukee. Nonprofit lenders cater to low-income individuals that meet certain criteria, helping them get the car that they need to go back to work, and requiring some form of financial education to reduce the risk that they will default on the loan.
Benefits of Nonprofit Loans
Many nonprofit organizations offer loans as part of their overall mission to help a particular group of people. For example, veterans’ organizations might offer car loans to disabled veterans who can’t afford other methods of auto financing, so they offer low interest rates and choose not to turn a profit on the loans. Interest rates on nonprofit loans are usually set very low, normally covering only the operational expenses of the nonprofit and a small premium to offset some of the risk of the loan.
Nonprofit Loans Help the Community
Nonprofit loans help the community by assisting the most vulnerable Americans to get cars without having to resort to the short-term “solutions” of predatory lenders and dishonest dealerships. These loans can provide the springboard for lower income Americans to get back into the economy, giving them a car to get to work and go to job interviews.
Nonprofit loan agencies indirectly help the other parts of the community as well, because they spur economic development and they help some of the lower income families save money for other necessities that they might purchase within their neighborhoods.
Financial Education Components
Typically nonprofit loan companies offer some form of financial education or counseling as a requirement of accepting their assistance. This component can include everything from meetings with financial planners to mandatory personal finance classes, and it is designed to help the borrower stabilize their finances to ensure that they will have the money to pay the loan back in the future. Financial education is also a long-term solution to poverty, and it can benefit people even after they’ve paid their loan back.
Applying for a Nonprofit Loan
Applying for a nonprofit loan is a little different than applying through a dealership or bank. Nonprofits have very different criteria that they look for when they choose borrowers. While banks might be primarily concerned with your credit score or work history, nonprofits instead look for where they can do the most good for the community – such as giving a loan to a single mom that needs the car to go back to work. Most nonprofit loans have short loan terms, and they usually have lower maximum amounts than other loans.