NCUF Innovation Grant Accelerates Used Auto Loan Drive

Caroline Anugioba and her son stand proudly by their 2002 Hyundai Santa Fe financed affordably at North Side Community Federal Credit Union.The National Credit Union Foundation (NCUF) has approved a $35,000 Innovation Grant to accelerate North Side Community Federal Credit Union’s drive to empower more low-wealth borrowers to afford cars.

“Without affordable auto loans,” North Side Community FCU CEO Ed Jacob observed, “many low-wealth families are unable to access the expanded job and housing opportunities that a car can help provide.”

(In the photo above, immigrants Caroline Anugioba and her son stand proudly by their 2002 Hyundai Santa Fe financed affordably at North Side Community FCU.)

In an underserved area where many sub-prime auto lenders charge much higher rates than the 18% federal usury limit, North Side Community FCU will use its grant from NCUF to reach members who need to refinance sub-prime loans. The credit union will also target “upside down” loans, where members’ outstanding balance exceeds their car’s value.

Here’s how:
  • Purchase quarterly reports from Trans Union to identify members who have auto loans with other lenders;
  • Partner with Payment Reporting Builds Credit (PRBC) to acquire a list of all “thin-file” credit reports that show a recent credit inquiry from auto dealerships on Chicago’s North Side;
Caroline Anugioba and Loan Manager Maria Montoya sign documents for an affordable used auto loan at North Side Community FCU.
  • Consider offering credit enhancements that would protect each borrower and the credit union: guaranteed asset protection (GAP) insurance, mechanical breakdown insurance, disability and job loss insurance;
  • For “upside-down” borrowers with strong job histories and adequate credit histories, consider financing over 100% of their car’s value with GAP insurance added to the loan pricing.
Click to read 7 lessons learned from the Steer Clear report.
This initiative incorporates lessons from NCUF’s research report, How Credit Unions Help Car-Buyers Steer Clear of Predatory Loans.

(Click the cover on the right to open the Steer Clear report. You'll find seven lessons learned by 251 credit unions offering used auto loans for non-prime borrowers.)

“The time is right for credit unions to pilot programs based on the groundbreaking research supported by the National Credit Union Foundation in partnership with the Annie E. Casey Foundation by the Aspen Institute,” Jacob suggested. “With our Innovation Grant, we will develop, test, and expand a model for a sustainable auto loan program that will help low-wealth borrowers who are historically not targeted by credit unions.”

REAL Solutions® Models

Click to find REAL Solutions

Successful models will be incorporated into NCUF's signature program, REAL Solutions®.

North Side Community FCU is one of hundreds of credit unions offering affordable products and services through REAL Solutions®. Their goal is to change the lives of members with low wealth and modest means.

Eighth of 14 NCUF Innovation Grants

This is the eighth of 14 Innovation Grants to be approved by NCUF in 2008. These grants are made possible by investors in the Community Investment Fund (CIF).
Click to see how to invest in the CIF!During the 2008 Innovation Grants application cycle, NCUF received 41 applications requesting over $2.2 million in funding. This was nearly four times the $600,000 budgeted for Innovation Grants through the CIF.

“Grant requests were much higher this year because the needs are much greater,” relates NCUF Deputy Director Steve Bosack, the Foundation’s staff liaison to the NCUF Grants Committee. “More credit unions are seeking innovative ways to serve people with low wealth and modest means.”

“More credit unions than ever are investing in the Community Investment Fund,” points out NCUF Executive Director Steve Delfin. “Yet here’s the paradox: even though CIF balances reached an all-time high, the fund has returned a much lower percentage of grant dollars in 2008. This is due to federal interest rate cuts from January through September. So especially during these challenging economic times, we thank all 650-plus CIF investors, the NCUF Board and Grants Committee for allowing us to maintain our $600,000 in Innovation Grant commitments and reward credit unions serving low-wealth households.”
Click here to see how to invest in the CIF!