Exciting news! Financial Guidance Center of Nevada is organizing Lending Circles™
For more information contact: Financial Guidance Center or call 1-800-451-4505. Ask for Jill Perry
What are informal lending circles?
A lending circles is when people get together to form a group loan. Everyone in the group contributes money to the loan, and everyone gets a chance at taking the loan out. People across the world organize loans between friends or family without a financial institution all the time. This practice is known by many different names across the world: Susus throughout Africa, Paluwagan in the Philippines, Lun-hui in China, and Tandas in Mexico. Participants may not have access to a bank, or may not be a good candidate for a traditional loan, or they may just prefer getting loans from people they know and trust.
How do informal lending circles work?
A small group of people come together, agree on how much they will put into the general fund each month, and they hold each other to it. Let’s say a group of five people agreed to contribute $10 per month for five months, at the end of each month, one person from the group gets $50. You keep going until everyone has had a chance at the $50. This is a popular way for people who don’t have bank accounts, who want to save money, or who can’t get approved for mainstream loans to get access to capitol. By relying on our neighbors, everyone benefits. These groups have an organizer who makes sure everyone makes their contributions on time, collects the contributions by keeping them somewhere at home or placing them in a private bank account. The organizer also distributes payments to the members and keeps track of whose turn it is to receive a distribution.
Sometimes the experience with an informal lending circle is not good. There have been heartbreaking stories about how one person in the group walked away with the loan and never repaid it, actually causing everyone else to lose money. Besides this risk, the other downside to an informal lending circle is that it doesn’t do anything to build your credit. While you may be able to get loans from your neighbors, you still can’t get one from a bank. Without credit, it’s hard to find apartments, build a business or even get a loan for school.
How is the Financial Guidance Center Lending Circles™ Program different?
We stay true to the roots of informal lending traditions found across the globe. This tried-and-true way of providing loans feels very comfortable and familiar. We speak the same language, we’re not in it for the gain, and we’re part of the community. Lending Circles helps low-income individuals get loans, build credit histories and learn to use loans wisely.
- We secure loans so if someone in the Lending Circles™ walks away, no participant loses money.
- We help improve credit scores by providing a bridge to mainstream credit by reporting payments to credit agencies, allowing our participants to build or improve their credit in a short amount of time.
- We provide financial education to help build knowledge about the financial system, loans and how to build assets.
- And the kicker? We are able to provide loans with NO fees to the client.
The Financial Guidance Center partners with Mission Asset Fund to provide Lending Circles™ to our community. Lending Circles™ participants get secure, interest-free loans and build their credit scores. Lending Circles™ are powered by Mission Asset Fund which provides the financial services and technology for this unique, credit-building loan program.