Salvation Army processes 3k loan applications over past five years

While celebrating a milestone of people borrowing money may seem counterintuitive, The Salvation Army Community Finance coordinator Siobhan Deans says the service is doing exactly what it was established to do: disrupting the third-tier lending sphere.

The Salvation Army has processed 3000 loan applications over the past five years as part of its Community Finance program.

While celebrating a milestone of people borrowing money may seem counterintuitive, The Salvation Army Community Finance coordinator Siobhan Deans says the service is doing exactly what it was established to do: disrupting the third-tier lending sphere.

Community Finance was established when Australian micro-finance organization, Good Shepherd, BNZ and the Salvation Army came together and a no-and-low interest loan service was set up.

"People often think all debt is bad, but that's not the case," Siobhan says.

"When debt is used responsibly it can be incredibly empowering."

People approaching The Salvation Army for help are often heavily indebted; the result of taking out emergency loans with unscrupulous lenders who charge interest rates as high as 400 percent.

People have been lent to in irresponsible ways, with few checks on their ability to repay the debt. Without checks on the affordability of a loan, the client often can't keep up with repayments and begins to incur costly penalties.

People on low incomes are struggling to pay for their basic costs of living. Throw in an emergency dental visit, or a car breaking down, and they have to find the money somewhere. Banks often won't lend to these clients, who may be unable to meet income thresholds for a loan, or have a bad credit rating – often the result of being unable to pay back high-interest lenders in the first place.

One example was a young man who quit his job which was steeped in drug use and gang activity. He was fearful for his safety. He was out of work for several months, but he found a job three weeks after obtaining a loan through The Salvation Army to purchase a car.

Another loan was made to a woman who had had the same dentures for many years. They rubbed her gums and she was in constant pain and struggling to eat. Unable to afford new dentures, she approached The Salvation Army for a loan that allowed her to get dentures that fitted properly, and continue working.

Community finance loans of up to $1,500 are no interest, while amounts of $1,000 and $5,000 attract a 6.99 percent interest rate.

"It has to be affordable," Siobhan says.

"We won't lend to people if it's going to put them into hardship."

Not everyone who applies for a loan receives one. While it can be hard refusing people, no one leaves without being helped.

"It's about education – they may not walk out with a loan, but they are more aware of their situation," Siobhan says.

"Sometimes it's not changing the world, but chipping away at the bit of the picture you can see."