• At least 18 years of age • Member for 6 months • No credit check • Income of $1,000 (net) or $1,200 (gross) • Loan must be paid in full before another advance is made

Vendors/Systems/Technology Used :

• No special technology is required.

• $300 maximum loan amount with monthly payments • 60-day repayment term • 18% APR • $30 application fee • $15 late fee after 10 days

• Those who may be using traditional payday lenders
• Those with short-term cash needs until payday and don’t qualify for traditional loans

Member Benefits:

• Payday lenders in Colorado can charge $60 for a $300 loan for 14 days
• A borrower would pay $257 for a 60-day loan with a payday lender compared to $36.50 for a Smart Solution Loan at Air Academy, or a savings of $220.
• Longer term makes repayments more manageable
• Financial counseling is available

Marketing Strategy:

• Fliers and military newspapers
• Member newsletter
• Credit union website as follows:

• Total # Borrowers: 157
• Total # loans: 500
• Total $ loans: $177,355
• Fee income: $14,820
• Interest income: $3,914
• Late fee income: $2,765
• Number of Charge offs: 16
• $ Charge offs: $4,050

Air Academy FCU decided to offer a payday loan alternative when it realized its military personnel were the primary targets of payday lenders. In fact, one in five active military soldiers had payday loans, reports Karin Kovalovsky, VP of marketing and corporate communications. When payday loans to military personnel and their families were capped at 36% and payday lenders started closing up shop, Air Academy realized it needed to step in and fill the short-term loan void by offering an alternative at reasonable rates and fees. Its Smart Solution Loan was the result. Within two months of launching the product, the credit union had 28 loans. As of the end of 2009, it had made 500 loans totaling $177,355.

Losses have been minimal, says Kovalovsky because borrowers “see the Smart Solution as a great product and service and don’t want to jeopardize access to it.” Although the product has minimum income requirements, the credit union is willing to look at a borrower’s situation. Kovalovsky tells the story of a young single mother who was already struggling financially and was using Air Academy’s Smart Solution Loan, when her daughter became very ill. As a result, the mother had to leave work for a while to care for her daughter. Her income declined to the point where she no longer qualified for the loan. However, the credit union worked with her and submitted an application to underwriting, which approved a loan to help her through her time of crisis. The young mother was so touched by the credit union’s compassion that she turned her back to payday lenders and became a faithful credit union member.

Air Academy highlights the positives of the product when marketing it. For example, its marketing message points out its longer repayment term, no credit check, quick and convenient, etc. It also markets its complimentary products to Smart Solution users including direct deposit, a fresh start loan, and a once-a-year skip-a-pay feature. Financial education through Balance is also marketed as a helpful solution to members experiencing ongoing financial crises.