DETROIT-Saying it's time to give members a bailout, one credit union is offering to cut members' auto loan rates in half.
Communicating Arts Credit Union has introduced the "Auto Bailout Loan," and CACU CEO Hank Hubbard said it is time to do something special for members.
"People are asking, 'Where is my bailout? Where is my bailout?' This year we'll give it to them," Hubbard observed. "We have a lot of members with car loans at predatory lenders."
The $32-million community development financial institution will leverage $1.5 million in Community Development Financial Institution grant money to back the "bailout" loan program, in which the credit union offers to cut in half the rates members are paying through other lenders, or even further if the member qualifies for a lower rate.
Loan Manager Carol Black said the credit union has many members with poor credit who have had to turn to unscrupulous lenders to get a car loan. "I expect to see rates as high as 22%."
Depending on their credit, borrowers will be able to cut their rate to as low as 2%, the offer's floor. But Black does not expect to see many borrowers walk in with a 4% rate asking for a refi, and advertising will be limited to direct mail, in branch, and on the credit union's website.
"But we are not restricting the offer to members who are in financial need. If someone is qualified, they will get the deal."
Communicating Arts Credit Union risk prices auto loans, and members with shaky credit will still have to qualify.
But Black said the credit union will work hard to find ways to make loans to all those who need them. CACU's standard rates at press time were 3.75% APR for five years for A credit and 14.75% for D paper for the same term.
Black said the offer will run until the grant money runs out, which she believes will happen by the end of April.
"But we will keep this going longer if the money is still there. This will help a lot of our members' monthly cash flow."
For example, Black said if a member walks in with an 18% loan on $20,000 for 60 months, cutting that rate in half will save the individual $92 per month and about $5,565 in finance charges over the life of the loan.
The promo will also help CACU boost auto loan growth, which last year was down 8.67% ($4.5 million) from 2010 ($5.1 million).
