CU Direct Corp.:
CU Lending Advice:
1. Environmental Scan resources: cuna.org/strategicplanning
2. CUNA Lending Council Conference, Nov. 2-5 in San Diego: cunalendingcouncil.org
Filene Research Institute:
National Credit Union Foundation’s Nonprime Auto Loan Toolkit:
While Freedom First Federal offers nonprime auto loans through its Responsible Rides program, Sun Federal Credit Union in Maumee, Ohio, does risk-based pricing for all of its auto loans.
That allows the credit union to include nonprime loans in the mix, says Kay Burrell, director of lending for the $446 million asset credit union.
In making loan decisions, “we listen to the member’s story first,” Burrell says. “Then we balance that with our lending guidelines to find something the member is able to pay.”
Once the decision is made to grant the loan, Sun Federal looks at the credit score to set the price. On loans with 37- to 72-month terms, for instance, members with credit scores of 740 or higher pay 3.25%.
Credit scores under 640 are considered to be nonprime. Members with scores of 600 to 639 pay 8.75%, while those below 600 pay 11.25%.
“We spread our risk across all tiers,” Burrell says, “so we get a good return on the entire portfolio.”
Sun Federal has a $34 million auto loan portfolio of which nonprime loans account for 12%. The average loan amount is $13,700.
The 60-day delinquency rate for the entire auto loan portfolio, nonprime included, is 0.40%.
Burrell concedes it would be far easier to focus solely on borrowers with credit scores above a certain level instead of listening to each member’s story and evaluating each individual’s repayment ability.
“But that’s not who we are,” she says. “When people need help, we want to help them. It’s really about building a relationship with members for the rest of their lives.”