Lending is a vital part of our difference

We learned straight from the consumer last year that credit union members do better in financial health measures than nonmembers, according to the CUNA National Voter Poll. That includes the Financial Health Network’s four components of financial health: spending, saving, borrowing, and planning.

The ability to borrow money affordably is a critical part of financial health. If we’re going to ensure credit unions remain consumers’ best financial partner, we’d better be ready to meet their borrowing needs.

Our National Voter Poll shows unequivocally that credit union members feel better about borrowing from their financial institution than nonmembers.

Members are twice as likely to respond very positively to the idea that their financial institutions make it easy to get loans. Nearly half (49%) of members say their institution provides low-cost loans, compared to 23% of nonmembers.

Our advocacy goals include modernized fields of membership and member business lending regulations to allow credit unions to lend even more.

To accomplish this, we need to show the credit union difference isn’t just a percentage of good feelings. It’s proving that credit unions meet the needs of consumers, especially those of modest means.

The more data we have, the more complete picture we can paint about what the credit union difference means in dollars and cents.

CUNA acquired a massive data set last year from Equifax that covers billions of consumer transactions. We wanted to look deeper into consumer data than we ever have before and get the real numbers behind the credit union difference.

We’re gaining some wonderful insight. Earlier this year, we began issuing a monthly report on credit union auto lending. This report shows that the credit union difference is very real in terms of money members saved.

Three categories of lenders—credit unions, banks, and auto finance companies—make 97% of auto loans. Our report covers national trends in credit union auto lending. 

Findings include:

Strong performance in new loan originations, while other lenders generally experienced a decline in balances. Credit unions’ year-to-date loan originations are 28.25% higher than the previous year.

A focus on staying true to their mission of service to consumers of all means. Credit unions extended more loans to nonprime borrowers. These consumers account for 23% of outstanding credit union loan balances, compared to 14% at banks.

Loan pricing is favorable across the credit score spectrum. A consumer taking out a six-year, $40,000 auto loan would pay an interest rate of 5.45% at a credit union, 6.86% at a bank, and 7.64% at a finance company. This member would save $1,927 over the life of the loan vs. using a bank, and $3,010 compared to a finance company. Consumers with lower credit scores would save even more at a credit union.

Strong loan quality. Despite extending more loans to deep subprime, subprime, and near-prime borrowers compared with banks, credit unions’ 60-day loan delinquency is 0.24%, the lowest in the industry.

Combine the better rates and life-of-loan savings credit union members experience with the positive feelings about their financial institution that our voter poll shows, and you have a more complete look at the credit union difference.

This data makes clear what we’ve been saying all along: Policies that lead to more consumer participation in and access to credit unions would improve the financial health of millions, especially those with lower financial health and those hit hardest during the pandemic.

This data is exciting, and we’re only scratching the surface of what we can learn.

JIM NUSSLE is president/CEO at Credit Union National Association.