Loan Program Is A Door-Buster
DETROIT-For members of Detroit Metropolitan CU, there's nothing like Easy Money.
That's why they lined up in the lobby and outside the doors of the credit union's main office on a recent Saturday when the credit union made the first of its twice annual Easy Money loans, a $500 signature loan the credit union hands out until 1,000 are made.
"Then the promotion is over," said CEO Cathie Trembath about the loan special that always attracts big crowds. "We started this four years ago-we put a half million on the table and do 1,000 loans."
Credit standards are relaxed for the loan that charges 18% and is paid back in five months. "We do it to help the members," said Trembath. "It's a way for them to get some extra money and most of them have poor credit and would not otherwise qualify for a loan."
There are no special requirements other than the member must be in good standing with DMCU, have been working for the last five years, and have some sort of direct deposit coming to the credit union each month. Trembath said most pay for this loan via payroll deduction. The credit union's normal signature loan is risk priced starting at 11%.
Margins are thin but the loans are priced to cover defaults. "Each loan promotion we evaluate individually and our losses have ranged anywhere from 1.6% to 2.7%."
Yet, overall, the special has been doing well enough for Trembath to consider increasing the loan amount from $500 to possibly $750 next time.
Bills Not Being Reduced
"So many of our members are struggling, losing their jobs or facing cutbacks and reduced hours. Their income is being reduced but their bills are not," said Trembath.
Trembath noted Detroit's municipal workforce has been cut in half over the last 40 years, which has helped erodeDetroit Metro's loan-to-share ratio to 12%. "But our capital is strong at 15%, and to some degree I think we are fortunate our loan-to-share ratio is low. It may have been what saved us during this latest economic downturn. We did not have much money in mortgages and therefore our loan losses have been minimal."
The only real issue with Easy Money is staffing, which Trembath said the $450-million CU has mastered since it started originally making the loans. "We staff up, take the apps one week, and send them the following week to get processed. Then we come in on a Saturday and post them all. We have the system down pat. Members know ahead of time that the money will be in their accounts by 2 p.m. the following Saturday."