More and more Credit Unions around the county are doing indirect lending and many have a “Fresh Start” type of program that helps credit-challenged members obtain a late model, low mileage, reliable pre-owned vehicle at fair and reasonable interest rates. This is a “win win” situation for the consumer and the lender.
To curb the natural losses that will occur when dealing with credit-challenged borrowers, credit unions are using GPS technology as a risk mitigation tool and making a GPS device a requirement to obtain the loan. The decision to use a device can be part of the underwriting process and full disclosure is encouraged.
GPS devices can be used with or without a starter interrupt relay as desired by the lender. Many lenders choose to disable a vehicle by preventing the starter motor from working. This practice encourages delinquent borrowers to keep in contact with the lenders and can be used to enforce physical damage insurance requirements, as well as timely payments.
Many credit unions are building a portfolio of higher yielding consumer loans that also helps the individual members. When a credit union declines an automobile loan, customers who must have transportation will often turn to the Buy Here Pay Here market and end up paying too much for too little, saddled with very high interest rate loan and an older, high mileage vehicle. This results in borrowers being trapped in the cycle and the credit union loses the member and their sphere of influence forever.
Credit unions offering “Fresh Start” vehicle loans can also add ancillary products such as GAP insurance and service contracts, which yield commissions thereby making the loan a better investment for the lender.
Call for a consultation, more information or to order, 770-871-0051.