Convenience, Cost and Profitability: CUs Reconsider Small Loans
Despite the apparent financial pain to cover the underwriting costs of small loans under $600, some credit unions still feel there is a segment of their membership that rely on this type of financing.
However, the market for smaller loans may be shrinking if research from a new CUNA Lending Council white paper is any indication.
That doesn’t even account for consumer demand, Rogers noted. Most members who would qualify for a personal loan already have a credit card anyway and may not want to make the effort to apply for another loan.
Dave Colby, chief economist at CUNA Mutual Group, said the interest rate differential back in 1998 revealed that unsecured loans were priced 51 basis points above credit card rates. Today, the spread has increased to 157 basis points.