Car Ownership on a Low Income
Members who may not have the ability to buy a car are getting a second chance through North Side Community Federal Credit Union.
The $11 million credit union in Chicago received a grant from the National Credit Union Foundation to expand its Used Auto Loan Initiative. As of March, 24% of the auto loans underwritten through North Side’s new risk-based Access Auto Lending program were refinanced auto loans from other lenders and finance companies.
Other components of the initiative include refinancing of subprime used auto loans to members, offering credit enhancements to borrowers including disability and job loss insurance, and seminar partnerships with select employees groups on how to buy a good used car.
Over half of North Side’s members have balances of under $100 in their savings accounts, and over 75% have under $250, according to the credit union. For those with limited means, the only options for financial services are often predatory, North Side discovered.
With the introduction of Access Auto Lending, North Side said it 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.
Chiku Jallah has been a North Side member since 2004. Her first loan was an auto loan under the North Side’s Access Auto Lending program. She purchased a 2009 Kia Spectra through North Side’s partner, Enterprise Car Sales.
"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," Jallah said.
Jallah is just one success story. 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, according to North Side. 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.
"The purchase of an affordable, quality used car has become more important as jobs become more decentralized," said Lois Kitsch, NCUF national program director.
North Side said 100% of participants said they felt more comfortable about participating in researching or buying a car after attending the car buying education seminars.
"Many excellent tips were conveyed that help consumers save a significant amount of money," said Kimberly Stathis, asset development coordinator at Heartland Human Care Services, Inc., a North Side partner. "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."