A little-known federal loan program has helped millions of households avoid financial ruin after a natural disaster by providing immediate cash to pay for home repairs, new research says.
The Federal Disaster Loan program over the past seven decades has loaned households more than $60 billion to speed recovery from natural catastrophes that cause so much damage that people cannot pay bills on time or at all.
The low-interest loans, provided by the Small Business Administration after every presidentially declared disaster, are provided in conjunction with larger disaster programs run by the Federal Emergency Management Agency and the Department of Housing and Urban Development.
Households that receive the loans experience significantly less financial distress than those who do not, says a working paperpublished in August by the Federal Reserve Bank of Chicago. The researchers found that loan recipients are more than 60 percent less likely to file for bankruptcy in the first three years post-disaster than those who did not get a loan.
