The Downward Spiral of Payday Loans

What your church can do to help

What are payday loans?

A payday loan is a small amount of money loaned at a high interest rate, with the agreement that the borrower will repay the loan with his or her next paycheck. People with poor or no credit, who are denied bank loans, take out payday loans. Typically, the loans are for an amount of about $500, but often one week’s loan rolls into a new loan, generating substantial late fees and interest payments because the borrower could not pay off the initial loan. For more information on payday loans, visit

How do payday loans affect your congregation?

A study by The Pew Charitable Trusts estimates that 12 million Americans use payday loans each year. Financial insecurity is a sensitive topic for most people, and broaching the subject without making people defensive can be tricky. Still, members of your congregation could be taking out payday loans. One of the best ways to ease into a conversation is to offer a broad, community-wide informational session covering financial topics such as budgeting, investments, and of course, loan options.

What can your church do to help?

  • Depending on your church’s budget, one of the most effective ways to help your congregation is to offer your own small loans with more fair terms. Protect the church’s finances by setting limits on the amount you put at risk.
  • Start a conversation with local businesses to offer a similar loan program to their workers, beginning with business owners in your congregation.
  • Partner with Society for Financial Awareness (SOFA), a nationwide nonprofit dedicated to spreading financial education so people can learn to manage their money effectively. Workshops by volunteers often cost nothing or little. For more information on SOFA, visit
  • Advocate for reforms on payday loans in your state. Form a congregational financial committee that works to organize educational opportunities, advocates for fair lending, and acts as a focal point for any financial questions members of the congregation may have.

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