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CU System
Chicago CU uses grant for low-wealth car loans
CHICAGO (5/23/11)--A $35,000 grant from the National Credit Union Foundation (NCUF) has helped North Side Community FCU, Chicago, offer affordable car loans to low-wealth individuals and families.
With the help of a grant from the National Credit Union Foundation, North Side Community FCU, Chicago, has expanded its used-auto lending program to provide more benefit to low-wealth members. North Side member Chiku Jallah stands next to her 2009 Kia Spectra, purchased through a loan made possible by the credit union’s risk-based auto-lending program. (Photo provided by the National Credit Union Foundation)
North Side Community FCU used the grant to expand its used-auto loan initiative, a sustainable program for low-wealth consumers historically untargeted by traditional community financial institutions. “The purchase of an affordable, quality used car has become more important as jobs become more decentralized,” said Lois Kitsch, NCUF national program director. “Programs like North Side Community FCU’s are essential to helping low-wealth families access the expanded job and housing opportunities that a car can help provide.” The core products and services of North Side Community FCU’s used-auto loan initiative include:
* Refinancing of subprime used-auto loans; * Risk-based auto lending; * Access to affordable used-auto loans to individuals who lack a conventional credit history; * Credit enhancements, including disability and job loss insurance; * Used-car buying seminars in partnership with select-employee groups (SEGs); and * An affordable and accessible menu of financial products and services.
“I wanted to finance with North Side Community FCU because I knew that with my lengthy history as a member, my good credit and their superb customer service, they would offer me a great interest rate with excellent service,” said Chiku Jallah, a credit union member since 200. Her first auto loan was under the credit union’s Access Auto Lending program. Her 2009 Kia Spectra was bought through North Side’s partner, Enterprise Car Sales. Throughout its history, North Side Community FCU has focused on helping low-wealth people build wealth through financial education and basic financial service products. More than half of the credit union’s members have balances of less than $100 in their savings accounts, and more than 75% have balances less than $250. For those with limited means, the only options for financial services are often predatory lenders. As a result North Side Community FCU developed its used-auto initiative to aid borrowers with limited options for obtaining financing due to a lack of conventional credit history. The NCUF report “How Credit Unions Help Car-Buyers Steer Clear of Predatory Loans” helped guide the credit union in developing the program. As of March, 24% of the auto loans underwritten through the program were refinanced auto loans from other lenders. One member improved his interest rate to 7.5% from 10.25%, saving nearly $1,000 in finance charges. Another member refinanced her auto loan to 10% from a 17%, reducing her monthly payment by $300 and freeing up additional funds to pay other debts. The Northside Community FCU has also been able to opened auto loan financing to a wider spectrum of borrowers, including those with low scores or with thin credit files that cannot be scored. The lowest borrower credit score under the program has been 463. Those with credit scores averaged a score of 616. The credit union has held eight “How to Buy a Good Used Car” seminars, with more planned this year. Four of the seminars were in partnership with Heartland Alliance--one of the credit union’s SEGs--and two were led in Spanish. The credit union researched, created and compiled its own curriculum, including a video produced by Consumers for Auto Reliability and Safety. North Side Community FCU’s ability to serve its core membership has helped it grow. The credit union experienced a 57.5% membership increase in 2010 among low- and moderate-income community residents and clients or staff of its 50 SEG partners. Many members are new immigrants to the U.S., mentally ill, and those whose only income is either disability or social security. NCUF grants are made possible by supporters of the foundation and the Community Investment Fund (CIF), an award-winning system of investments that help credit unions earn dividends while donating to national and state community development programs.
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