One Detroit Credit Union plans to expand an Auto Bailout Program that refinances existing high-interest auto loans and already has saved more than $2 million for its members.
In the current round, which started just over a year ago, the credit union refinanced more than 300 loans with an original average annual percentage rate (APR) of 14.1 percent. The average new rate at One Detroit Credit Union was 6.46 percent. That round alone saved members a total of $1 million.
The Auto Bailout Program initially was available to One Detroit Credit Union members, their friends and family. The credit union now wants to open the program to all qualified local borrowers, specifically those with extraordinarily high rates. This initiative is part of the credit union's long-term plan to be the primary financial institution for Detroit's neighborhoods.
One Detroit Credit Union has invested $10.3 million in the program and has helped nearly 600 people reduce their auto loan rates at least 50 percent since the Auto Bailout Program launched in 2012.
"To put that in perspective, nearly two-thirds of the loans we've refinanced had rates of more than 10 percent," said Hank Hubbard, One Detroit Credit Union president and CEO. "About a third had original rates of more than 18 percent and 10 loans had rates higher than 24 percent. There were cases where we cut someone's rate from more than 20 percent to lower than 5 percent."
In the last year the program reduced monthly payments an average of $54.16, or $3,476.43 over the life of the loan.
"Without us, more than $2 million would have gone to often predatory lenders outside of the community," said Hubbard. "It is better to keep those dollars in the community for residents to use at the local grocery store, to pay utility bills, buy the medicines they need and for other major items that will help improve their lives."
The program helped many borrowers with high interest rates keep their vehicles. For many Detroiters, vehicle ownership is essential to finding and keeping a job as well as getting to stores that offer healthy food options.
"Public transportation in the neighborhoods is almost non-existent," Hubbard said. "The need for access to a reliable car is critical to bridge all of the most basic market gaps we see – unemployment, healthy food, education, affordable financial services and more."
When the interest rate is high, paying that bill takes more of a borrower's household income. In some cases, people will pay the auto loan instead of their mortgage, utility bills and other debts because they need their car or truck to get to work. That negatively impacts their ability to reshape their personal situation as well as their neighborhoods.
"We are committed to our city's transformation, which must include empowering Detroiters to improve their quality of life," said Hubbard. "This program does just that. It has not only saved our borrowers thousands of dollars, it has helped them improve their credit scores, reduce their debt to income ratio and increase their net worth.
"We are altogether One Detroit," he said.
About One Detroit Credit Union
Founded in 1935 and previously known as Communicating Arts Credit Union, One Detroit Credit Union's mission is to help people in the Detroit community who have been overlooked by the mainstream banking system by providing them with credible, fair and reasonably priced financial products and services. It has three main branches in Detroit and numerous ATM locations. Membership is open to people who live or work in Wayne County.
Source : prnewswire.com