One Detroit Credit Union Creates First-Time Auto Loan Program, Helps Detroiters with Essential Travel Needs
In the Motor City, access to a reliable vehicle is a critical need. Public transit, particularly between the city and suburbs, is lacking and leaves most residents in need of a car to get to work.
Many auto buyers have a steady income and don’t have issues paying off auto loans. However, many lenders rely solely on credit scores when determining whether to approve a borrower for financing and at what rate they are approved. This leaves many first-time buyers saddled with an unaffordably high interest rate, if they aren’t denied credit altogether.
One Detroit Credit Union has created a solution for those looking to own their first automobile. The First-Time Auto Loans program is designed for members who have not had a vehicle loan before, are purchasing their first vehicle and have no credit or poor credit.
The credit union’s goal is to help improve mobility and, subsequently, employment in Detroit. Within the program’s first 100 days, they helped 27 members and funded $370,657 in auto loans for first-time buyers.
“Detroiters who have limited credit, or no credit, will normally have a hard time financing a vehicle, which they need to travel to work, school and other essentials. Many of them end up turning to a predatory auto lender whose interest rates are double and triple that of a mainstream financial institution,” said Joumana McDad, One Detroit’s chief strategy and innovation officer. “This leads to devastating cycles of inescapable debt and financial isolation. First-Time Auto Loans are designed to give everyone a chance to start building their credit with affordable, reasonable terms. If we can help them have a successful experience with their first loan, it’s setting them up for a future with strong credit and empowering them to control their financial destinies.”
Among the program’s features are no required co-signer, an 8.99% APR regardless of credit score and a 90-day employment record. These are all put in place to make the loans both accessible and successful in the long term.
On top of that, One Detroit has partnered with United Way’s Center for Working Families to offer life coaching services to help members stay on track with loan payments.
“Our partnership with the United Way provided critically needed financial literacy support for members who are obtaining their very first loan,” continued McDad. “The Center for Working Families is able to help those who need a little extra support in navigating the terms of their loan and balancing their personal budget. They have been essential to the program’s success.”
“The One Detroit Credit Union First-Time Auto Loan is an innovative product that meets a real need in our community,” said Megan Thibos, director of economic mobility initiatives for United Way for Southeastern Michigan. “Reliable transportation is critical to maintaining employment and family economic security.”
According to Thibos, Before this product was introduced, United Way’s clients often had little choice but to gamble on buying an aging vehicle of questionable reliability. This was usually done by entering into an exploitative loan contract with a low-end car dealership or by scraping together enough cash to buy the lowest-cost vehicle they could find.
“This program is helping low-income families access needed financing at an affordable cost so that they can purchase a reliable used vehicle. It has been a pleasure to work with the team to develop the product with the needs of our clients in mind,” said Thibos.