//Home / Solutions / Lending / Payday Loan Alternatives

Smart Solution Loan - Air Academy

Credit Union :Air Academy
Assets :$47,608,800
Address :P.O. Box 62910 | Colorado Spring, CO 80962-2910
Open / Closed End :Open

Loan Underwriting Qualifications :

• 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.

Rates, Fees, and Terms :

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

Target Market :

  • 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:

  • Member newsletter
  • Credit union website

Program Results/Statistics :

  • Total # Borrowers: 334
  • Total # loans: 1,063
  • Total $ loans: $406,182
  • Fee income: $28,890
  • Interest income: $9,842
  • Late fee income: $6,901
  • Number of Charge-offs: 14
  • Net $ Charged-off: $2,019

Additional Information :

Air Academy Federal Credit Union (AAFCU) decided to offer a payday loan alternative after realizing military personnel were the primary targets of payday lenders. According to a 2005 study by the Center for Responsible Lending, 20% of active-duty military members had taken out a payday loan. In 2007, Congress passed legislation making it illegal to charge service members more than 36% interest and as penalties increased for predatory lending practices many payday lenders stopped lending to military individuals. Air Academy realized it needed to step in and fill the short-term loan void by offering an alternative solution with 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 June 30, 2013, it had made 1,063 loans totaling $406,182.

Losses have been minimal as AAFCU’s borrowers see the Smart Solution Loan as a great alternative to a traditional payday loan and do not want to jeopardize their access to it. Although the product has minimum income requirements, the credit union is willing to look at each borrower’s unique circumstances. For example, AAFCU helped a single mother who was already struggling financially. She 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 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 and a fresh start loan. Online financial education and management tools are also offered as a helpful solution to members experiencing ongoing financial crises.

Additional Information :

Air Academy Federal Credit Union (AAFCU) decided to offer a payday loan alternative after realizing military personnel were the primary targets of payday lenders. According to a 2005 study by the Center for Responsible Lending, 20% of active-duty military members had taken out a payday loan. In 2007, Congress passed legislation making it illegal to charge service members more than 36% interest and as penalties increased for predatory lending practices many payday lenders stopped lending to military individuals. Air Academy realized it needed to step in and fill the short-term loan void by offering an alternative solution with 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 June 30, 2013, it had made 1,063 loans totaling $406,182.

Smart Solution:

Are you not sure you can make it until payday? Smart Solution is exactly what it sounds like: an intelligent solution to payday loans.

We feature a much lower interest rate, with a longer repayment term than ordinary payday lenders. There’s no credit check, and it’s quick and convenient!