RICHMOND, VA (WWBT) - Help is on the way for state employees and it's in the form of a low interest emergency loan.
Monday morning, Governor Kaine announced a new short-term lending program. The loan is for up to $500 dollars and it's restricted to state employees only, but the governor says it's a good option for those need money in a hurry, while giving them an alternative to payday lending companies.
Governor Tim Kaine's stand on payday loan lenders is clear. He says it was a mistake to allow those companies into the commonwealth back in 2002. While the legislature continues to regulate their activities - a new option for state employees struggling during this economic recession.
"We can regulate pay day lending and other predatory lending but people do have a need for small dollar loans that not being met in the market place now," said Governor Kaine.
Current state employees who are members of the Virginia Credit Union are now eligible for emergency loans of up to $500, one at a time, twice a year. Borrowers will have up to 6 months to pay off the debt through payroll deductions at an interest rate of 24.99 percent.
"The rate is lower than 36 percent that was advocated by leading interest groups and lower, far lower than the predatory rates of 365 percent in Virginia last year," Kaine said.
The loan program is backed by grant money from the Commonwealth Virginia Campaign - money contributed by state employees, to help state employees and requires the completion of an online financial fitness course and exam.
"Do it in a way that can encourage those seeking the loans to become more financially literate and not get into cycles of debts," said Kaine.
State employees must apply online and while this specific program is restricted to current state employees, Governor Kaine hopes it will serve as a model for other private companies to follow suit.