MIDLAND, Mich. — Whether the money is for coping with an unexpectedly high gas bill or just paying for holiday gifts, the "Whatever Loan" continues to be a big success for Members First CU here.
The product, launched eight years ago, and has grown in popularity each year, said Pam Ayers, VP of lending at the $335 million credit union.
"It's a loan for $1,000 their first year," Ayers said. "We have certain qualifications that we make the member have and there's no credit report run or anything. They're given the money and as long as it's paid back, next year they're eligible for $1,500."
In addition to being a member at the credit union, to qualify for the loan, members must have been employed for at least six months and have direct deposit with the credit union.
Trish Ross, VP of marketing, added that the product was first offered as a loan for members whose credit scores might be too low to qualify for other loans.
The "Whatever Loan" is offered every year around the holiday season, but CU officials decided to call it a "whatever" rather than a Christmas loan because "we wanted the membership to know that id didn't have to be used for Christmas," said Ayers.
Members First generally makes the loans available sometime in early November, and members often calling in in advance of the start date to find out if and when the Whatever Loan will be offered. The loan is primarily promoted through word of mouth, Ross and Ayers said, though there is also some radio, newspaper and web advertising as well.
The credit union had a banner year with Whatever Loans in 2014, loaning out more than $2.7 million (2,707 loans) in just the first two days. Compare that to last year, when the credit union lent out $2.7 during the entire promotion.
The response during the first two days "was a record for us," said Ross, adding that the total was up to $3.8 million in the week before Christmas, with some members already making payments.
"This being the eighth year that we've done this, we've gotten better in our processes," she said. "If a member comes in one year and gets $1,000, the next year they can get $1,500. So we've automated that process where they get the preapproval in the mail and can go to the MSRs, and the MSRs can disperse funds."
A breakdown of how many members took $1,000 loans and how many took $1,500 loans was not available.
Income Booster
Whatever Loans are priced at 18%, plus a $25 application fee, and delinquency rates are only around 2% over the course of the last five years.
"Still with the 18% and the $25 fee, it's cheaper than any other alternative for that type of credit score person," said Ross.
She noted that while it bears a lot of similarities to a payday loan alternative, the CU has shied away from that name, in part because "we really want to get a real payday lending product in place that we don't have yet, so this is more of a signature-type loan."
The $25 fee also adds a healthy bit of non-interest income for the credit union, but Ayers and Ross noted that one of the biggest benefits of the loan is the additional business.
Last year approximately 2,200 Whatever Loan recipients received direct mail promoting auto loans, and the CU saw a 3.86% direct response rate with members bringing auto loan business to the institution.
Members First's most recent Call Report shows net income earnings of $1.16 million during the first three quarters of the year, following earnings of $1.688 million in 2013.
"The membership that we have looks forward to [the Whatever Loan]," said Ayers. "If we were to run credit on our members we would find very low credit scores. So the risk that we're taking on, we don't feel t's that risky because our delinquency has been so low. And they know that if they miss a payment they don't get it next year."
