LAS VEGAS — Provided the process is handled "smartly," credit unions ought to be taking a keener look at non-prime auto credits as a means of bolstering income, a CUNA Mutual Group executive advised Wednesday.
"We're seeing many credit unions with squeaky clean portfolios simply unwilling to take that risk in dropping below 680 scores," said Steve Martin, director of CMG's lending protection unit in Madison, Wis.
The market for prime credits, in which the majority of CUs are involved in now, has become "very competitive" with little money to be made, observed Martin a speaker at a breakout session during the annual meeting of Credit Union Direct Lending Corp. opening today.
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However, by adopting careful controls, CUs can find untold opportunities in the nonprime field by loosening up on loan limitations in such areas down payments, term limits and loan to value ratios and doing it in such a way that it becomes attractive to the dealer and borrower.
Some CUs simply "deny loans below 680 scores" and yet with careful management of the limits good yields can be secured "on scores of 650 or slightly below" adding "it's all a matter of how the loan decisioning is made."
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