MADISON, Wis. (3/17/16)--The National Credit Union Foundation released a feasibility study report on its Non-Prime Auto Lending program, revealing the success for both participating credit unions and member-borrowers.
The foundation, Filene Research Institute and the Ford Foundation partnered to test the program within Filene’s Accessible Financial Services Incubator. The results? Ten credit unions closed 7,605 loans for more than $102 million, with an average loan amount of $12,136.
Testimonials from borrowers were enthusiastic and insightful. “This loan had such a huge impact on my life! I have three jobs and am a single mother so having a vehicle is necessary for me to provide for my family,” reported one borrower. Financial and anecdotal results revealed positive consumer demand and positive consumer impact.
“Through prudent pricing for riskier non-prime auto loans, credit unions can add to their bottom lines, while at the same time fill a social need of helping consumers improve their health and well-being through affordable credit for used cars,” the report said.
A strong market opportunity exists as cars provide convenience, flexibility, safety and the opportunity for lower-income people to work for companies that are not located near public transportation. Credit unions have an opportunity to ensure that workers with low wages or low credit scores are able to purchase reliable, affordable cars.
“If you can’t get to your work, how are you going to work? Responsible Rides, though, isn’t a charity,” said Dave Prosser, vice president of community development, Freedom First FCU, Roanoke, Va., in the study. “It is a business that makes money for Freedom First--lending to people who work hard and can be trusted to repay their debt.”
A complementary implementation guide explains the market opportunity, consumer impact, and marketing and reporting tools.