While most observers say that nearly any credit union can find success with signature lending — closed-end, unsecured loans — some of those that have the most success are CUs that tailor them to a specific niche.
Silver State Schools Credit Union in Las Vegas, for example, has found success by tailoring signature loans to educators, including loans for classroom supplies or to help pay for advanced certifications.
One element that helps boost those loans — Silver State Schools booked more than $3.5 million in signature loans last year — is that the CU does not currently offer a credit card, which some members might otherwise use to pay for those things.
Steve VanSickler, the CU's VP and chief credit officer, noted that one advantage to signature loans is that they don't ding members' credit scores in the same way that applying for a credit card can.
At SkyOne FCU in Hawthorne, Calif., about 20% of the CU's portfolio is centered on unsecured loans, including signature loans, Visa credit cards and lines of credit.
But Jeff Smith, COO at the $381 million credit union, told CU Journal that while his credit union has seen success with signature loans, some of the more specialized offerings — such as loans to pay for certification as a pilot or loans specifically for FAA technicians — "haven't really taken off."
"Most of our true members are really good credit — A and B credit — and qualify for regular Visas, I would say, and use them. Whenever we try to come up with something that's unique for them, we just don't get a lot of business right off the bat."
While SkyOne still offers those loans and other specialized products, they are not widely publicized, said Smith.
But it doesn't have to be specialized products — many CUs find success in signature loans just by being familiar with the needs of a niche membership.
Arty Arteaga, president and CEO of the Defense Credit Union Council in Washington D.C., noted that because those who work at CUs on or near military bases are so familiar with military life — many of them having served themselves — they have a unique understanding of what those members need.
An Alternative To Payday Loans
Arteaga cited the Payday Alternative Loan at Air Force FCU, as well as the Asset Recovery Program at Pentagon FCU, as products designed to combat the predatory lending that often occurs near military bases. He also cited the fact that CUs on military bases "stood up to the task and developed special products and services" to support both enlisted personnel and civilian employees during last year's government shutdown.
That level of familiarity — both from the credit union and the members — is a big part of what it takes to be successful in signature lending, said SkyOne's Smith.
"If they do it right, anyone can do it," he said.
But Smith also cautioned that community CUs might not do as well, since opening up to a wider range of members might also bring in applicants that are less loyal to the CU and have poorer credit scores.
Then again, he added, "larger community credit unions could be more successful because they can take more losses."
