BY LEAH BETH WARD, JEFF McKINNEY
and PERRY BROTHERS
The Cincinnati Enquirer
Governments and private banks are offering grants and low-interest loans to help individuals and businesses clean up and rebuild. But borrowers beware: Not all loans are created equal.
Many area banks are offering special financing and much quicker approval than the government, whose loans can take several weeks or longer to process.
Bank loans can be used immediately to start the repair process or supplement a strained family budget until insurance claims or other disaster relief is paid.
And the Federal Home Loan Bank of Cincinnati (FHLB) on Friday established a $100 million disaster recovery fund - available through June - for communities affected by the flooding in Ohio, Kentucky and Indiana. A list of participating institutions will be available next week.
But the government's terms are hard to beat, especially for lower-income flood victims, and should be considered before a private-sector loan, officials from the Federal Emergency Management Agency (FEMA) say.
In either case, experts say borrowers need to step back first and approach their situation analytically. Bernard Kaiser, executive director of Consumer Credit Counseling Service (CCCS) of Cincinnati, said it is crucial to work out a budget before asking for a federal or bank loan.
''Don't jump into anything,'' he said. ''Look at your assets and then sit down and figure out 'What do I need to get by?' - the bare basics.''
FEMA money can be a direct grant for housing assistance, which does not have to be repaid, or a loan for physical damage and economic loss through the federal Small Business Administration (SBA). The SBA's involvement should not deter individuals; they are eligible for loans along with businesses.
FEMA loan rates start at 4 percent and can go to 8 percent, depending on the borrower's personal financial situation and credit history, according to Carl Suchocki, spokesman in Washington, D.C.
Mr. Suchocki noted that FEMA loans, unlike bank loans, are restricted. ''The use has to be dedicated to the disaster,'' he said.
Housing grants are capped at $10,000. Homeowners can borrow up to $200,000 for their primary residence and up to $40,000 to cover personal property. Loans to businesses are capped at $1.5 million.
Local financial institutions are offering a variety of flood-related loans, and many say they will work with customers on a case-by-case basis to try to meet specific loan situations.
Centennial Savings Bank in Westwood, which has made a commitment to receive $10 million through the FHLB fund, will offer loans at below-market rates, said Michael Collins, assistant vice president of lending.
Mr. Collins could not say how the loans will be priced but said the bank will try to process requests in a matter of days. Usually, the process takes two to four weeks.
KeyBank in Cincinnati is offering special low-rate, no-fee, home-improvement loans to get cash to flood victims within 24 hours. The unsecured loans, which can be used for home repairs, will carry an interest rate 2 percent below the bank's regular rate. The minimum loan amount has been lowered from $3,000 to $1,000, and a $50 fee has been waived.
Cincinnati-based Star Bank is offering a package that enables borrowers to receive a half percentage point reduction in standard rates on new loans. The first payment can be deferred for six months, and there are no closing costs.
But bank loans most likely are out of reach for flood victims who have little or no credit or lack assets against which to borrow. Mr. Kaiser, the credit counselor, advises people in such situations to still prepare a budget that includes their income potential and a list of absolute necessities.
Flood victims with substantial outstanding indebtedness should not dismiss creditors' willingness to work out lenient repayment terms. And don't borrow anew needlessly.
''What you don't want to do is run to your bank and re-sign a mortgage or talk to credit organizations about consolidation,'' Mr. Kaiser said. ''Those might be good things to do at some point, but now is not the time to make that decision.''