Many hardworking employees are finding themselves trapped in the cycle of high-interest loans, forcing them to deplete their savings or retirement funds and compromise their long-term financial security.
When customers were asked by Kashable, a provider of “socially responsible” credit and financial wellness solutions, if they have ever borrowed from a high-interest lender through title loans, credit cards or payday loans, an alarming number of people – over 70% of respondents – said yes. This trend proves the critical need for more accessible and affordable credit solutions.
Responsible credit solutions can play a significant role in enhancing employees’ financial health and stability. By offering an alternative to high-interest lending, Kashable helps employees manage their financial needs while safeguarding their long-term goals.
We spoke to Kashable co-CEO and co-founder, Einat Steklov, who provided detailed insights into lending options and discussed how Kashable is making a noticeable difference in employees’ lives.
A recent survey from Kashable revealed that over 70% of respondents have used high-interest lenders. What are some key reasons individuals resort to these high-interest credit options despite their financial drawbacks?
Einat Steklov: People may choose high-interest lenders due to a lack of financial literacy and awareness of better alternatives. In urgent situations, they seek quick cash without considering the long-term impact on their financial future.
Traditional credit systems often fail to accommodate those with poor credit scores, making high-interest lenders one of the few available options.
Crowdfund Insider: What are the biggest challenges facing working Americans in terms of financial wellness, and how can we address these challenges?
Einat Steklov: Working Americans are facing significant financial challenges, including the rising cost of living due to inflation, inadequate savings, and high levels of debt. Many struggle to keep up with increasing expenses for housing, healthcare, and education, which often surpass wage growth.
Additionally, a substantial portion of the workforce lacks sufficient emergency savings, making them vulnerable to unexpected financial setbacks. Personal debt further exacerbates this stress, leaving many unable to save for long-term goals such as retirement.
To address these challenges, financial education and robust employer-sponsored benefits are essential. Employers can play a pivotal role by offering financial wellness programs that include resources for budgeting, saving and debt management. Immediate solutions, like access to low-cost loans, can provide short-term relief while longer-term strategies, such as encouraging participation in retirement plans through automatic enrollment and matching contributions, help workers build a secure financial future.
Crowdfund Insider: How does financial stress among employees affect workplace productivity and morale?
Einat Steklov: When employees are worried about personal financial issues, their concentration and performance at work can suffer. This stress can lead to increased absenteeism, higher turnover rates, and decreased engagement. Financial stress often results in physical and mental health problems, such as anxiety and depression, which can further impact an employee’s performance. These factors contribute to instability and dissatisfaction among the workforce, ultimately harming productivity.
Access to low-cost, credit-building loans can help individuals manage financial emergencies and reduce stress. This has the potential to stabilize their personal finances and may also improve their overall well-being while at work. Consequently, employees are more likely to be focused, productive, and motivated, creating a positive work environment and boosting morale.
Employers can show commitment to their employees’ financial well-being by offering benefits such as financial education, coaching, or access to credit. These measures can lead to increased loyalty and reduced turnover.
Crowdfund Insider: How can access to low-cost loans contribute to long-term financial stability and security for borrowers?
Einat Steklov: Low-cost loans provide an alternative to early retirement withdrawals, which can undermine retirement growth and may jeopardize future retirement plans. With affordable rates, low-cost loans allow borrowers to handle debt without compromising their future financial security.
For instance, instead of using retirement savings like 401(k) withdrawals—which can incur penalties and deplete long-term growth—low-cost loans help borrowers meet immediate needs while preserving retirement savings. Additionally, some fintech companies use alternative credit data to approve those with low credit scores, helping them build a positive credit history and fostering financial inclusion and stability.
Crowdfund Insider: How can lenders leverage technology to enhance financial inclusion and improve the credit-scoring system, particularly for those lacking a traditional credit history?
Einat Steklov: Lenders can use technology to boost financial inclusion by incorporating alternative data and advanced analytics into credit decisions. Traditional credit scores may exclude individuals with non-traditional credit histories, such as young adults, immigrants, or those without credit products.
By including alternative data like employment history, utility payments, or rental history, lenders can create more accurate risk profiles, offering a better assessment of creditworthiness and financial behavior.
Crowdfund Insider: What benefits does using an alternative credit model offer?
Einat Steklov: Using alternative credit models enhances financial inclusion by addressing gaps in traditional credit scoring systems that often exclude underbanked individuals or those with thin credit files. Alternative credit models use non-traditional data, such as employment history, rent and utility payments, and checking account management, to provide a more comprehensive assessment of creditworthiness.
This approach helps lenders identify creditworthy individuals who lack substantial traditional credit histories, expanding access to credit for many who are marginalized by conventional methods.
Additionally, alternative credit models improve risk assessment accuracy by considering a broader range of financial behaviors. By analyzing diverse and up-to-date data points, lenders can make more informed decisions that better reflect an individual’s true financial health and repayment ability. For borrowers, applying for credit through lenders that use additional data points often results in a higher likelihood of approval, which can help them build a positive credit history.
Access to affordable credit through alternative models empowers individuals to make financial advancements, such as starting a business, investing in education, or managing emergency expenses. This, in turn, contributes to overall economic growth and stability.
Crowdfund Insider: What role do you see corporate partnerships having in promoting financial wellness among the workforce?
Einat Steklov: Corporate partnerships are vital in promoting financial wellness among company employees, and are evolving to include an array of integrated services and benefits tailored to employees’ diverse needs. A handful of companies are collaborating with financial institutions, fintechs, and educational organizations to provide comprehensive financial resource tools that focus on education, savings and investment programs.
However, there is always an opportunity for more companies to offer these benefits to employees. These partnerships enable employers to offer customized financial wellness programs that address immediate concerns while also promoting long-term financial planning for retirement and major life events. By leveraging these partnerships, companies can enhance employee satisfaction, reduce financial stress, and improve productivity, contributing to a more engaged and financially secure workforce.
Crowdfund Insider: What advice would you give to someone considering a low-cost loan for managing debt or funding major expenses?
Einat Steklov: When considering a low-cost loan, it’s crucial to thoroughly assess your financial situation and ensure the loan terms align with your repayment capabilities.
Start by comparing interest rates, fees, and repayment schedules from various lenders to find the most cost-effective option. Evaluate the total cost of the loan, including any fees, and consider its impact on your credit profile.
Ensure the monthly payments fit within your budget to avoid further financial strain. A well-planned and informed decision can help you manage debt or finance major expenses effectively while maintaining financial stability.
