Breaking a Multi-Year Cycle of Loan Refinancing

“Within two days of applying, I received the money and immediately paid off my high-interest rate loan with another lender. I felt more financially secure right away, thanks to the Economic Justice Fund. My credit score increased the next month.”

RASHII

In 2015, Rashii, an accounting professional, had just ended a relationship and was searching for a new home.

However, at the time, she needed extra money to put down on a house.

A coworker suggested she get a secured loan, financing you can receive from a bank or financial institution if you pledge a personal asset as collateral.

Rashii decided to apply for one through an online lender, received $15,000, and moved into her new home.

“The loan helped at that time,” she says. “But it can also get you into trouble because I first got that loan in 2015, and we’re now in 2023. So I have literally been trying to pay this off for the last seven years, and the balance hasn’t gone down significantly.”

Rashii says that in the years since getting that first loan, she’s refinanced or transferred the balance to five other lenders hoping to find a lower interest rate or reduced monthly payment.

“Pretty much just like every year and a half, I would find another company, apply, pay off that loan, pay off some more bills, and repeat,” she says.

One day in 2020, Rashii found herself in another financial bind. This time, she started searching for another option and fortunately can across the Economic Justice Fund’s (EJF) website.

“And based on what I read, I just felt like this company would be a great fit compared to all the other financial companies I’ve gone through.”

A new type of loan servicer

Before applying for a loan through EJF, Rashii thoroughly researched the nonprofit, reading reviews, scouring the website, and calling staff to ask questions about the application process.

After conducting her due diligence, she applied and was quickly approved for a loan. “I just couldn’t believe how fast the whole process was,” she says. “Other companies take about a week or two to gather your information before they finally deliver the money. With the Economic Justice Fund, I believe, within two days, I had the money available in my bank. So, I felt it was a company that was just very efficient.”

Rashii used the loan funds to pay off her high-interest credit card and loan debt and to catch up on bill payments.

“Ever since I did that, I’ve been pretty much on track financially where I was able to get my credit score back up because I have paid those bills off with the money that I have received from the Economic Justice Fund,” she explains.

Breaking the cycle of loan refinancing

Rashii’s first secured loan had a dangerously high-interest rate of 35%, which she found challenging to repay.

“A lot of these companies, you can have decent credit,” she says. “And that doesn’t mean anything; you’ll still have a high interest rate.”

She says living in a constant cycle of searching for and transferring loans was stressful, and she often wondered “how [she] got herself into” her financial constraints.

However, since she obtained the loan from EJF, her credit has significantly improved, and she hasn’t needed to find another loan company.

“I want to pay this loan off, improve my financial position, and be completely done with needing more loans,” Rashii explains. “I don’t want to do it anymore. I’m in a better place with my job where I make a little bit more money, so my goal is to pay this loan off, which is much easier because of the very low-interest rate.”

She says she has learned to manage her money better and is counting down to the day she fully pays off her EJF loan.

Advice on obtaining and managing a secured loan

After spending several years refinancing loans, Rashii has advice for others considering a journey to receiving secured loans:

• First, research the loan companies, such as reading customer reviews.
• Then, call to ask about interest rates, fees, and other pertinent details.
• Pay close attention to your interest rates, not just your monthly rates, because the interest rates determine how much money you will end up paying for the loan.
• Don’t use credit cards unless you can fully pay off the balance within a month.
• If you don’t need a loan, do not get one!