A nonprofit program could begin offering Waco-area residents a lower-interest alternative to payday and auto title lenders as early as next month.

Community Loan Center of the Heart of Texas would provide short-term loans of up to $1,000 to employees of participating employers, starting with the city of Waco.

The system will allow borrowers to fill out an application online and quickly receive the money in their bank account once their employment is verified.

The nonprofit Texas Community Capital will provide the initial capitalization and oversight and will work with a local nonprofit group to administer the program.

The Heart of Texas Goodwill board of directors will vote later this month on becoming the responsible agency.

Waco City Council members have pushed for the program as a way to prevent Waco-area residents from getting trapped in a cycle of debt with payday loans.

“Any of us can have something happen,” said Dan Niseley, president and CEO of Heart of Texas Goodwill. “Let’s say your cars break down and you have a baby. When that happens, you might need some quick money. But you get in there, and it’s hard to get out in a two-week period.”

The past decade has seen a proliferation of firms that give high-interest loans backed by a paycheck or a car title. Greater Waco now has 36 such lenders, which collected $9.8 million in interest and fees last year, Texas Community Capital officials said. The firms repossessed 690 cars in this county last year and on average refinanced each loan 1.9 times.

In Texas, a payday or title loan of $500 taken out for 14 days costs $115 in interest and fees. The typical annualized interest rate, or APR, is 664 percent on a $1,000 loan, according to the loan center.

By contrast, the Community Loan Center will offer up to $1,000 for up to one year at an APR rate of 21.8 percent. Borrowers can pay off their loan at any time with no penalty.

With the online Community Loan Center, no credit check is required, but payment history will be reported to credit agencies, giving employees a chance to improve their credit history.

The Community Loan Center program has been established in seven Texas communities so far, including Austin, Dallas, Houston, Laredo, Bryan-College Station and the Rio Grande Valley.

In the past few years, the centers have written more than 5,500 loans and saved employees more than $3 million, with a loan loss of only 3.5 percent. Texas Community Capital officials say the unpaid loans are typically the result of people losing their jobs.

The repaid loans are used to build a rotating loan fund, along with a “modest” payment to the sponsoring nonprofit group for overhead expenses, said Howard Porter, Texas Community Capital program manager.

He said the program also pays for financial counseling to borrowers to keep them from needing high-interest loans in the future, Porter said.

Waco City Council gave its informal blessing last week to participate in the program.

“We have been very receptive to this,” Mayor Malcolm Duncan Jr. said.

He said the program meshes with the Prosper Waco initiative to reduce poverty.

He said 57 percent of Waco residents are “asset poor,” meaning they could not survive 90 days above the poverty rate if they lost their job.

District 4 Councilman Dillon Meek expressed enthusiasm for the program, calling payday lending “a real problem in my district.”

Councilman Wilbert Austin, whose district includes East Waco, said he recently saw a woman crying in her yard and learned that her car was about to be repossessed because of $350 she owed on a title loan.

“A good Samaritan paid that off,” he said. “But it really bothers me that our state senators can’t do anything more about this. . . . I’m glad to see this happening. This is not in the talking stage but in the moving stage.”

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