Low-wealth individuals and families in the Northeast side of Chicago have access to affordable car ownership thanks to North Side Community Federal Credit Union. North Side Community FCU received a grant from the National Credit Union Foundation (NCUF) to expand their “Used Auto Loan Initiative,” a successful, sustainable auto loan program for low-wealth individuals historically untargeted by credit unions in the community.
“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 consist of:
- Refinancing of subprime used auto loans to members
- Their risk-based Access Auto Lending program
- Access to affordable used auto loans to individuals that lack a conventional credit history
- Offering credit enhancements to borrowers including disability and job loss insurance
- “How to Buy a Good Used Car” seminars in partnership with major Select Employee Groups (SEGs)
- Affordable and accessible financial products and services available through membership with North Side Community FCU
"I wanted to finance with North Side Community Federal Credit Union 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 a credit union member since 2004 whose first loan was an auto loan under the North Side Community FCU’s Access Auto Lending program. The member's 2009 Kia Spectra was bought through North Side’s partner, Enterprise Car Sales.
North Side Community FCU – Serving the Underserved
The Used Auto Loan Initiative is a natural fit for North Side Community FCU. Throughout their history, North Side Community FCU has served an important market niche, focusing efforts on helping low- wealth people build wealth through financial education and basic financial service products.
For example, over half of North Side’s members have balances of under $100 in their savings accounts, and over 75% have under $250. Unfortunately, for those with limited means, the only options for financial services are often predatory. Therefore, the credit union developed their used auto initiative to aid borrowers that have limited options beyond subprime lenders when obtaining financing, or no options due to lack of conventional credit history. They also developed their program in part using NCUF’s 2008 report, “How Credit Unions Help Car-Buyers Steer Clear of Predatory Loans.” (The report and other resources for credit unions looking to offer non-prime auto loans are available here from REAL Solutions).
Source: North Side Community FCU
Kristen Cox, Marketing and Community Relations Manager at North Side Community FCU, leads a "How to Buy a Good Used Car" seminar during Money Smart Week 2011.
North Side Community FCU - Making an Impact
As of March, 2011, 24% of the auto loans underwritten through North Side’s new risk-based Access Auto Lending program were refinanced auto loans from other lenders/finance companies. One member who had financed his car at 10.25% was able to improve his credit and qualify for a 7.5% rate under Access Auto Lending, saving him nearly $1,000 in finance charges. Another member refinanced her auto loan from a 17% rate to a 10% rate with the credit union, enabling her monthly auto loan payment to be reduced by nearly $300 and freeing up additional funds for her to pay down other debts.
With the introduction of Access Auto Lending, the credit union has also been able to open auto loan financing to a wider spectrum of borrowers, including those with low scores or with thin credit files that are unable to be scored. The lowest borrower credit score under the program has been 463. Those with credit scores averaged a score of 616.
North Side has conducted eight “How to Buy a Good Used Car” seminars with more planned this year. Four were in partnership with Heartland Alliance - one of North Side’s primary SEGs - and two of these seminars were led in Spanish. North Side researched, created and compiled their own curriculum complete with a user-friendly video produced by Consumers for Auto Reliability and Safety (C.A.R.S).
"The 'How to Buy a Good Used Car' workshop is a very beneficial workshop,” said Kimberly Stathis, Asset Development Coordinator at Heartland Human Care Services, Inc, a North Side partner. “Many excellent tips were conveyed that help consumers save a significant amount of money. One tip is to get pre-approved by a bank or credit union for a loan before beginning to look for a car. This way, high interest rates which are offered by the car dealers, can be avoided."
100% of participants wrote that they felt more comfortable about participating in researching or buying a car after attending North Side's car seminars. 82% indicated an increase in knowledge about the car buying process after attending the seminar; 18% indicated having the same knowledge after attending the seminar. 73% indicated an increase in confidence in approaching a bank or dealership for auto financing after attending the seminar; and 27% indicated having the same confidence after attending the seminar.
Examples of actions participants wrote they would take upon completing the workshops were:
- “Pass information on to someone else who is interested in buying a car”;
- “Get pre-approved for a car loan”;
- “Research about I-Go Cars”; and
- “Get my credit under control.”
North Side Community FCU also experienced a 57.5% increase in membership in 2010 among majority low– and moderate-income community residents and clients or staff of over 50 SEG partners. They opened 400 new accounts in 2009 compared to 630 in 2010. A large percentage of their members are new immigrants to the country, residents with mental illness, and those whose only income is either disability or social security.
A Foundation Grant at Work
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.
This “Grant at Work” is part of a series highlighting NCUF grantees making a positive impact in their community and empowering consumers to achieve financial independence through credit unions.
About the National Credit Union Foundation (ncuf.coop):
NCUF is funded primarily by investments in the award-winning Community Investment Fund (CIF) and by generous Supporters led by the Credit Union National Association and CUNA Mutual Group. All NCUF donors provide support that empowers NCUF and state credit union foundations to make a real impact in the credit union community.
The National Credit Union Foundation is the US credit union movement’s primary national philanthropic program provider, fundraiser and grant-maker. Through NCUF grants and programs, credit unions provide widespread financial education, create greater access to affordable financial services, and empower more consumers to save, build assets, and own homes.
The National Credit Union Foundation is a 501(c)(3) tax-exempt charitable organization. NCUF continues to earn the Better Business Bureau seal of approval as an “Accredited Charity” for meeting all 20 BBB Wise Giving Alliance Standards for national charities.