Wed, Dec 11, 2013
’Tis the season to be jolly, but for borrowers dependent on fringe financial providers, year-end mirth frequently turns to New Year regret. So how can credit unions help their most vulnerable members avoid the temptation to overextend their wallets? Education and alternatives are a great place to start.
Johns Hopkins Federal Credit Union ($343.9M, Baltimore, MD) recognizes the financial pressures that accompany the holidays and provides a number of season-specific products and tools for its members, says Lynn Gregory, senior vice president of marketing and member services. Examples include a $1,200 unsecured holiday loan, complete with an interest rate as low as 6.25%, and a Holiday Club account into which savers direct a portion of their established direct deposits, then roll over funds into a share account in October. Both products are popular with certain segments, and members rolled more than $1.5 million out of their Holiday Club accounts this year alone.
Yet not every member has the self-discipline or the credit score to take advantage of these options. Recognizing this unmet need, the credit union began offering an alternative holiday loan product — initially called the 12-12-12 loan — four years ago. With relaxed credit standards, a limit of $1,200 with 12% APR, and a 12-month term, the product presents a safer, more affordable option than many members had access to before.
“The idea was to offer these loans to those who just didn’t qualify for normal credit,” Gregory says. “Borrowers just need to have been a member for one year, have a Beacon score of 560 or above, and have no more than nine non-sufficient funds charges year to date.”