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Micro loans

What is the KDVA Micro Loan Program?

The KDVA micro loan program is available to survivors of domestic violence that are also active savers in the IDA-classic and Car-IDA programs. Micro loans are a useful tool available to help participants increase credit scores.

How do KDVA micro loans work?

The micro loans will be secured with the money a participant has saved in an Individual Development Account. The IDA participant can borrow up to the amount of savings they have in their IDA savings account. However, the first loan to each participant will be limited to $500. Loans typically run between $200-$1,000. 

No Interest on Secured Loan

KDVA is pleased to offer this micro loan as a no-interest loan. This means that the participant will only need to pay back the principle amount of the loan with no added costs.

Use of Loan Proceeds

There is no requirement for how the loan should be spent. For example, participants can use the loan to cover expenses incurred during an emergency, start an emergency savings account, or pay off collection debt. While KDVA does not have any restrictions for how the loan proceeds are spent, KDVA requires participants to work with an IDA advocate before requesting a loan. 

Eligibility

Any IDA participant can apply for a KDVA micro loan, but KDVA prefers that participants be in their second or third year. In all cases, IDA advocates will screen the participants to be sure that they are a good fit for the program. IDA advocates will explain the loan agreement and ensure the participant understands the terms. Participants must have an active IDA with a good history of savings, and the participant may borrow no more than is in the account.

Timeframe of Secured Loan

Micro loans will be paid back over one year. During the application process an IDA advocate will work with the applicant to explain the terms of the loan and decide on a suitable payment plan. Monthly payments are required.

Default on Secured Loan

Since KDVA is reporting monthly activity to the credit bureaus regarding the payments of the KDVA secured micro-loans, KDVA is required to be honest about our transactions and the participant’s payments. If a participant is late or misses a payment, KDVA is obligated to report this accurately. These missed payments could negatively affect a participant’s credit score. If a participant is 120 days delinquent on payments, the loan will be considered to be in default. At this time, KDVA will use the money in the participants’ IDA to pay off the remainder of the amount owed on the loan and the loan will be closed. This ensures that no delinquent accounts will be moved to collections. KDVA will then report to the credit bureaus that the account was paid in full by the participant.

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