DETROIT -
By the end of the special promotion, more than 1,000 Detroit area families had signed up for the "Holiday Quick Loans," which the credit union is offering for the first time this year. The $318-million DMCU set aside $500,000 to fund the loans, which were available in amounts between $300 and $500. One special feature: no credit check, with approval dependent upon certain qualifications.
"With the holidays coming up, we wanted to do something to help get our members through some difficult financial times," DMCU CEO Kathie Trembath said. "Some of the people applying can't get credit elsewhere or are overextended."
Trembath said she knew there was a definite need for the program and that the credit union was seeking to deter members from turning to payday lenders. What it had not accurately projected, said Trembath, was just how popular the loan program would be. It found out when those members were lined up four hours ahead of the credit union's opening.
"We didn't want members to pay exorbitant rates [to payday lenders] but by Tuesday the following day, we gave out all the loan applications and had to start a waitlist," she said.
The criteria for getting a Holiday Quick Loan are relatively easy. DMCU members need to have 2 years at their current job to qualify for $300 and five years to qualify for $500, each member must sign up for payroll deduction and they must be in good standing with the credit union to qualify for the no-credit-check loans.
The interest rate of the loans is 18% and they must be repaid in four months and six months for a $300 or $500 loan, respectively.
Despite the inherent risk associated with a no-credit-check loan, Trembath is projecting that no more than 2% of the loans will have to be written off.
"We hope we don't sustain high losses because we hope we can do this every six months," she said, adding that if the Holiday Quick Loan is successful, the 22,700-member DMCU may try another round of loans in the spring. "It's a win-win for everybody because members don't have to pay the high cost of payday loans and we're able to increase the numbers of loans we make."
Not everyone taking out a Holiday Quick Loan plans to buy holiday gifts or a 20- pound turkey with the money. Instead, Trembath said she believed only 50% of the loans will be used for holiday gifts, with the other half being used to pay bills. "The loan amounts aren't that large, but for some living paycheck to paycheck, it can make a great difference," she said.
