ROANOKE, Va. (2/5/15)--In 2014, a study conducted by Urban Institute, the University of Maryland and UCLA revealed the difference that access to a car can make for a low-income family. Families with cars were more likely to move to neighborhoods with less poverty and were more likely to stay there. They lived in neighborhoods with lower unemployment rates, higher median rents and more access to parks and better-performing schools.
Recognizing this need within its membership back in 2010, $331 million-asset Freedom First FCU, Roanoke, Va., developed its Responsible Rides program to make car loans affordable to working families who may face credit challenges and have limited borrowing options.
"It's not until you don't have transportation that you realize how dependent you are on it," Dave Prosser, Freedom First FCU senior vice president of community development, told News Now.
"It might be the difference between getting a job that pays better and relying on a job that is situated on the bus line, or getting your child to reliable day care. If your child gets sick in the middle of the night, how are you going to get them to a provider?"
The credit union asks most applicants for a hardship letter that explains their circumstances and describes why transportation is essential to the household.
Freedom First FCU serves a five-county area that is largely rural. Three of the counties offer no public transportation.
Applicants must be at or below 300% of U.S. poverty level based on their family size and have no more than $1,500 in unpaid collections, excluding medical. Also, eligible members must not have filed for bankruptcy in last 12 months. The average household income of the typical borrower is $18,726, Prosser said.
|Responsible Rides expanded into Franklin County in 2014 through Freedom First's partnership with the nonprofit STEP Inc. (Freedom First FCU Photo)|
The credit union also verifies income and verifies rent or any recurring payments for applicants with a shallow credit history.
"Most of our referrals for these loans come from our nonprofit partners, but we also get invited to a lot of job fairs," Prosser said. "You can't recruit people if they don't have transportation so we provide a key piece of the puzzle. We also work a lot with the refugee and immigrant populations."
Once approved, borrowers must complete a budget worksheet and attend a three-hour classroom session. The first two hours of the class are related to household budgeting and finance. The final hour focuses on basic car care.
"We teach recipients why it's important to maintain the car in good working condition and prolong the life of it, how to change a tire, why it's important to change the oil and why you need to stop and read the owner's manual when the lights on the dashboard light go on," Prosser said. "We want to ensure the longevity of the vehicle."
Freedom First FCU even assists Responsible Rides participants in shopping for a vehicle. Some of the cars that members acquire are retired Enterprise Rent-A-Car vehicles. For the rest, Freedom First CU works with a select few local car dealers "that buy into what we're doing," Prosser said.
|Traveling nurse Tonya Dungee found reliable transportation through Responsible Rides. (Freedom First FCU Photo)|
The credit union limits borrowers to a choice of two or three cars, according to Prosser. "This is a reality check for the client," Prosser added. "We tell them, 'This vehicle isn't going to break down in six months.' Especially if the person has a family or is disabled, we need to help them find a vehicle that is the best fit for them."
The average car loan is about $10,500, Prosser said. Making regular payments can be a challenge for some borrowers. "We understand that for a lot of members it comes down to a decision of which payment should I make next," Prosser said. "We tell them, 'If you get into trouble, your first call needs to be us.' We continue to work with members long after the loan closes to let them know that we have options down the road for them if they do get into trouble."
The credit union makes about 10 Responsible Rides loans a month, Prosser said. In 2014, the program generated $926,000 in loans. Since 2010, the program has accounted for $2.9 million in loans, assisting 354 households.
"We've helped a lot of people, but this isn't a one-off program," Prosser said. "We try to get these members on the pathway of rebuilding their credit and putting the power back in their hands. We've got people who have started saving, and we've gotten them into our affordable home mortgage program.
"They've become long-term, productive members of our credit union, and they're making a positive contribution to the community."