This feasibility study highlights the key components and lessons learned from the research completed in the Incubator, demonstrating that the non-prime auto loan market is an untapped opportunity for success for both the credit union and the end consumer.Download
Non-Prime Auto Loans
Having reliable transportation allows for increased access to employment, housing, and education. However, many credit challenged consumers lack reliable transportation. Download the free and easy to use implementation resources below and get started today.
Non-Prime Auto Loans Details
Having reliable transportation allows for increased access to employment, housing, and education. Research shows that Americans need their automobiles. In fact, according to the Annie E. Casey Foundation, 88% of Americans drive to work and two-thirds of jobs are located in suburbs. Relying on public transportation, if available, can double commute time. Without a car, a person’s options become extremely limited and can keep a person mired in poverty.
However, many credit challenged consumers lack reliable transportation. The National Credit Union Foundation's Non-Prime Auto Loan program helps lenders offer and manage fairly-priced non-prime auto loans to consumers.
During the incubator's 18-month reporting period, ten credit unions closed 7,605 loans for over $102 million. The average loan per borrower was $12,136 and the average interest rate was 11.7%. Also, the average age of the borrowers was 36 years old with an average income of $42,418 and an average credit score of 584.
After reviewing this information, it is shown that there is a tremendous opportunity for credit unions to reach out to a market that has been disserved by predatory lenders and under-served by traditional lenders. Through prudent pricing for riskier non-prime auto loans, credit unions can add to their bottom lines, while at the same time fill a social need of helping consumers improve their health and well being through affordable credit for used cars.
Non-Prime Auto Loans was selected to move into the marketplace phase of the Incubator. To learn more about subsequent efforts to broaden awareness and use of the product, visit the Accessible Financial Services Incubator page.
“More than half the people participating in the Responsible Rides program are single parents, many of them juggling getting to work, getting to the grocery store and getting kids to and from school and daycare safely while relying on the bus or on aging cars that don’t always start when you turn the key. If you can’t get to your work, how are you going to work? Responsible Rides, though, isn’t a charity. It is a business that makes money for Freedom First - lending to people who work hard and can be trusted to repay their debt.”
Vice President of Community Development
Freedom First CU