This story was produced and originally published by Wisconsin Watch, a nonprofit, nonpartisan newsroom.
Mary T. had a $2,500 balance on her credit card. It came with a 26.9% interest rate.
“I wanted to be responsible and pay off my loan … but it was so hard to get it paid off,” the Madison resident said.
Then, she heard about St. Vincent de Paul-Madison’s microloan program. If she qualified, the organization would pay the credit card loan and Mary would then pay back St. Vincent de Paul on a loan with a 4.3% interest rate through a local bank.
“It’s July 2027 that I’ll have it paid off,” Mary said. “It was not hard to go through the paperwork, and they were so nice to me throughout the whole process.”
Mary is one of about 50 people helped by St. Vincent de Paul’s microloan program since it started in late 2023. The Madison organization launched its initiative to help people living in poverty manage a one-time bill or pay off high-interest payday loans.
“People get trapped in these loans,” said Julie Bennett, CEO and executive director of St. Vincent de Paul-Madison. “They take out a loan to help with a car repair, for example, and the interest just grows. They then need another loan or need to extend the loan because they can’t pay the interest, and it just spirals.”
Since St. Vincent de Paul-Madison started its microloan program, the organization has made nearly $100,000 in loans, and word has spread. The St. Vincent de Paul-St. Thomas More Conference in Appleton launched its microloan program in February.
“The first microloan we made was for someone who had an auto title loan with a 305% effective interest rate. He had a $1,500 loan, and we were able to get him down to a 5% interest rate,” Bennett said.
Finding an alternative to payday loans
The Madison organization’s leaders learned about microloan programs offered by St. Vincent de Paul conferences in Columbus, Ohio, and Dallas, Texas, after attending national events. Members thought it was a great program they could bring back to Wisconsin, which has some of the highest average payday loan interest rates in the nation. A report from The Pew Charitable Trusts found state residents pay an average of $395 in fees and interest when repaying a $500 loan after four months, for an interest rate of 338%.
As the Madison organization’s leaders worked on the 2019-2022 strategic plan, Bennett said creating a microloan program was included on the to-do list. They looked at other microloan programs and struggled at first to understand the complexity of banking. St. Vincent de Paul-Madison created a task force that included financial representatives who helped them understand how the loan process would work. Representatives from local organizations that work with those living in poverty also joined the task force.
While St. Vincent de Paul-Madison provides the money for the loans, its leaders must partner with financial institutions to process the loans and help create a positive lending experience for the borrower’s credit report. The Bank of Sun Prairie signed on as the organization’s first banking partner in 2023, with Lake Ridge Bank joining in 2025.
“We needed a financial partner to take care of all the loan documentation and to make sure the loan was on (the borrower’s) record,” Bennett said. “If they pay off the loan successfully, it looks good on their credit record and gives them something to build on.”
Microloan recipients must meet several requirements to qualify, including being a Dane County resident, having a monthly household income at or below 300% of the federal poverty level, being willing to have a bank account and having a monthly debt-to-income ratio under 47%.
As part of the program, loans range from $400 to $2,500. Borrowers receive low-interest rates between 4% and 8% and set up flexible repayment plans over two years through local banks.
“We see the microloans as an alternative to payday loans for people who need money but have no other source to go to,” Bennett said. “We also see the microloans as a way to pay off those payday loans, which cause immediate and long-term harm to borrowers since the interest rates keep going up.”
Borrowers also receive financial education and support to help them avoid similar situations in the future. Bennett said St. Vincent de Paul-Madison wanted to provide that education with a sensitive approach. The University of Wisconsin-Extension’s Financial Education program developed training for the microlending team so they could have sensitive, discreet conversations.
“No one likes talking to strangers about their money, and it’s even harder when their financial condition is precarious,” she said.
The microloan program carries some risk for St. Vincent de Paul-Madison. If borrowers default on their loans, the organization is on the hook for paying them off. Unfortunately, that has happened, though Bennett declined to share how many people have defaulted.
To Mary, being able to get her interest rate to a predictable and manageable number was vital.
“I just know how much I need to pay without the total … going up all the time, with the interest … growing,” she said. “I felt I was never making any progress with the payments. Now, I can see when it’s all going to be paid off, and I know I’m going to get it done.”
An example to others
The Madison team paid their experience forward, and leaders from an Appleton organization took notice.
Karen Rickert, a member of St. Vincent de Paul-St. Thomas More Conference, heard Bennett speak about Madison’s microloan program at an event. In her years as a volunteer, Rickert saw many people caught living paycheck to paycheck. A woman who was hit with a car repair bill and turned to a payday lender stuck with Rickert.
“The repair costs were more than what we could help with. She couldn’t go to work because she didn’t have a working car. She couldn’t take her kids to school because she didn’t have a car. She eventually had to take out one of those terrible payday loans,” Rickert said. “I felt terrible about it, but it sprung me into action.”
Members from the Appleton organization met with Bennett and learned as much as possible about the Madison group’s microloan program. They put their bylaws and plans together.
The next step? Raising $20,000 to serve as security for the loans. Thanks to a grant and donations, they nearly doubled their goal.
Nicolet Bank signed on as the financial institution. Rickert said the organization has several volunteers who used to work in finance and banking. They “walk hand-in-hand with our borrowers through the process to help address any issues before they become a problem,” she said.
For organizations looking to start their own microloan programs, Bennett and Rickert recommended talking to groups with their own initiatives and being prepared to ask a lot of questions. The St. Thomas More Conference learned a lot by talking with the Madison organization and others as they put their microloan program together, Rickert said.
“It was a lot of work and took us a while to get it going, but it was worth it,” she said.
With everything in place, the Appleton organization made its first microloan in February.
“It’s amazing to see this all come together and now we’re able to help people get loans at a reasonable rate and help steer them away from payday loans,” Rickert said. “We’re helping them get a step ahead.”