CLINTON TOWNSHIP, Mich.-A Fresh Start Loan from Central Macomb Community CU is designed to help members rebuild their credit.
"We know that there's a certain part of the population that's underserved, and we've been trying to reach out," explained Paula Rose, VP of marketing at the 16,000-member, $161 million credit union. "It's really hard when our member service reps or lending department has to turn down somebody for a loan because of poor credit or bad decisions they've made along the way that's set them back."
With the Fresh Start Loan, members can borrow up to $1,000 at 15% interest. The funds are held in an account for 12 months while members make monthly payments and pay interest on the loan.
Since the program launched in August, the CU has funded 12 loans, including 11 in September and one during the first week of October. Consumer Lending Manager Roy MacDonald said the credit union expects that as the product gains steam and more members become aware of the offering, between 20 and 30 loans will be written a month.
Members receive the funds when the loan is fully paid off. Rose added that once the loan reaches maturity, members can apply for an unsecured $2,000 loan. The rate on that product is credit dependent.
Members aren't always thrilled about the idea of not getting the funds for a full year on the Fresh Start Loan, CU officials noted.
"It is a little bit of a hurdle, but when we talk with them and educate them about how to rebuild their credit, then they like the idea because now they're thinking 'I've got Christmas coming up in 2014 and that money is there; I'm not touching it, and I'll have the money for me at that time frame,'" said MacDonald.
In addition to the 15% rate, Central Macomb also asks that members have credit life/credit disability along with the loan, although it is not required. There is no target credit score for the loan, said MacDonald, in part because some of the members this product is marketed toward may have limited or no credit history.
Members must be employed to be eligible for the loan, and be able to provide two paystubs and two references. The loan is processed like all other loans at Central Macomb Community, and members must qualify within the CU's debt ratio guidelines. There are no credit counseling courses required.
The CU is marketing the Fresh Start Loan via flyers, newsletters and in-branch signage. Over time, Central Macomb Community also plans to add web and social media components to its marketing.
"We don't expect to spend a lot of money on promoting this," said Rose. "We just want to let the members know who come in that this is available."
