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In the United States, there are many schemes and ways through which people can have access to loans at cheap rates or even no-cost loans. Totally “free loans” are few-these would be loans taken without any repayment requirement. The following options provide financial assistance either at negligible or no interest rates, very often aimed at specific groups like students, businesspersons, or anyone experiencing temporary financial crises.
Federal Student Loans for Education
In many cases, federal loans from the U.S. government can be considered almost “free” or highly affordable because the interest rates are low, as are the advantageous repayment terms, including income-driven repayment, and possible loan forgiveness for public service workers. Key programs include:
Direct Subsidized Loans: This is a need-based loan option for undergraduate students. While you’re at school, during the one-time six-month grace period, and during deferment, the government pays the interest.
Public Service Loan Forgiveness Program: The PSLF will forgive the outstanding balance on the Direct Loans after 120 qualifying payments under a qualifying repayment plan for individuals working in public service-related careers.
Income-Driven Repayment Plans: The reduction in the amount of the monthly payment depends on the income level and household size. Loan forgiveness may even be applicable for as little as 20-25 years.
Nonprofit and Community-Based Microloans
The following nonprofit organizations and community-based lenders specialize in microloans or zero-interest loans, targeting small business owners, new entrepreneurs, and people experiencing financial hardship:
Kiva U.S.: Kiva is a nonprofit that provides 0% interest crowdfunded loans to small business owners and entrepreneurs. Loans can be granted up to $15,000, and borrowers may invest this amount in their businesses without concern for building up interest.
Jewish Free Loan Association (JFLA): JFLA provides interest-free loans regardless of background for education, emergencies, and small businesses, among other needs, with flexible terms of repayment.
Employer Assistance Programs
The assistance programs of many employers allow employees to finance education or emergencies without having to borrow. Examples of these include:
Employer Tuition Assistance: Many employers pay for tuition, especially if your course of study has a direct relation to your job. This, in essence, can be an interest-free “loan” in that you may be required to stay with the employer for a certain period of time.
Employer-Provided Emergency Loans: Some employers offer emergency no-interest short-term loans to help employees deal with emergencies or to meet unexpected expenses. Check with your HR department to see if such programs are available.
Government and Local Assistance Programs
There are a number of financial assistance options available from the government, either low-interest or forgivable, based on financial need, location, or other criteria:
HUD and FHA Loans for Housing: Although not full free, FHA loans have lesser down payments and easier credit, making it more reachable. Certain states and cities have their own down-payment assistance programs that can reduce the upfront cost involved or offer forgivable loans.
Disaster Relief Loans: These are low-interest or forgivable loans provided through the SBA and FEMA in cases of natural disasters, which help put individuals and businesses on their feet.
Community Development Financial Institutions (CDFIs)
CDFI’s are banks and credit unions that extend loans and other financial services in the most underserved communities. Often, they may be able to offer lower interest rates or flexible terms and may have options for forgivable loans in some instances. Programs include:
Opportunity Fund: A non-profit organization which provides loans to small business enterprises, giving priority to women-owned and minority-owned businesses.
Grameen America: Provides low-income female entrepreneurs in specific regions with low-interest or zero-interest-rate microloans.
Peer-to-Peer Lending Platforms
While not free, P2P lending services such as Prosper, LendingClub, and Upstart, could offer lower interest rates compared to banking institutions, depending on your credit score. Some sites provide options for those with less than perfect credit at even more lenient terms.
Religious and Community-Based Financial Assistance
Some faith-based and community-based groups provide zero-interest loans for emergency needs or community development. These are usually specific to members within the community or the respective faith group:
Christian Community Credit Union: Provides loans to members, including more affordable loans taken out for education or emergencies.
Local Church or Synagogue Programs: Most churches, synagogues, and mosques maintain an emergency fund or even zero-interest lending programs for those in need within their flock.
Credit Unions
Credit unions are owned by their members, and the rates on loans are generally lower than at for-profit banks. Some credit unions offer zero-interest loans, particularly if you are in a hardship situation, or will have payday alternative loans well below the rates charged by payday lenders.
Tips to Qualify for Low- or Zero-Interest Loans
Here are some steps you can take to increase the chance that you’ll be able to get a very low-cost or zero-interest loan:
Build good credit: Most of these lending programs are designed to require good credit, so keep your credit score current or improving.
Tap into local and online resources: Research what community programs, nonprofits, and religious organizations are available to help financially in your area.
Gather financial documentation: Many zero-interest programs require proof of need, so be sure to have all pertinent financial documentation at hand.