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2nd Chance Car Loan – Community Choice

Credit Union :Community Choice
Assets :$30,001,800
Address :6921 E. 72 Nd Av | Commerce City, CO 80022
Start Date :2004
Open / Closed End :Open

Loan Underwriting Qualifications :

Borrower Qualifications:

  • Those with credit scores between 550 and 599
  • Must agree to have PassTime device installed onto car

Rates, Fees, and Terms :

  • 16% APR
  • After 12 months of timely payments, rate can be reduced
  • Loans are usually capped at $15,000
  • Terms up to 48 months

Vendors/Systems/Technology Used:

  • A Passtime Device, a starter interruption device, is installed at the time of the car purchase through AutoTrek, the credit union’s auto buying partner, or other dealers, provided they install the devise. Members are provided with a password by the credit union to start the car.

Target Market :

  • Those who would otherwise be denied auto loans because of past credit issues

Marketing Strategy:

  • Members who have credit scores between 550 and 599 are provided with information about a Passtime loan and how the device works.

Program Results/Statistics :

  • The credit union has made about 75 Passtime loans over five years for about $800,000
  • Only two vehicles have been repossessed with losses less than $10,000 total
  • Goal is to do about five subprime loans a month

Member Benefits:

  • Members with very low credit scores are able to purchase a quality car
  • Members are reminded when car payments are due
  • On-time payments can result in a lower interest rate after 12 months
  • Payment reminders reduce delinquency and late fees charged to borrowers

Additional Information :

Community Choice Credit Union has been offering the Passtime device loan to borrowers with poor credit for almost six years. About 20% of the CU’s loan portfolio is in C & D paper, says Rainy Thoen, CEO. Recently, the CU lowered its interest rate for the 2nd Chance Car Loan from 21% to 16% because losses and delinquency for the product were minimal. “It is a successful and popular product,” says Thoen, “because it reminds people when payments are due. They like having that reminder and it helps them avoid late fees.”

The device begins to chirp when a payment is past due. The credit union can determine when the car won’t start based on delinquency. The devise doesn’t shut off the car if it is running; it just prevents it from starting. However, if the member is facing an emergency, he/she can call the credit union and get a onetime password to start the car. The credit union can uninstall the devise at any time. The cost for the devise is around $285, says Thoen, and is added into the loan amount.