Loan zone: Cars for graduates

This CU program reaches out to younger members.

One of the first things college graduates need and/or want after landing their first real job is a car.

The problem is that many recent graduates don't have sufficient credit histories to finance a car. Unless they are willing to pay above-market interest rates or to provide a co-signer with a good credit history, they can't get affordable financing, because most scoring systems look for length of employment, credit history, home ownership, etc., to build a score that will be awarded a competitive interest rate.

Several years ago we brought into our field of membership the students of Nicholls State University. Shortly thereafter, the loan officers at ASI Federal Credit Union were seeing more and more applications from young professionals, which, when credit scored, resulted in interest rate determinations that seemed to be higher than the risk associated with the loan.

And yet, these were the people (who, when they had established good credit histories as most of them would) financial institutions would be soliciting. It made sense to establish a relationship early on with these applicants.

In line with this thinking, ASI FCU started its semi-annual "Graduate Car Loan Sale" three years ago.

SELLING AND CROSS SELLING

The month-long promotions are held each May and December to coincide with graduation dates. The program guidelines include the following:

* The program is available to any recent college graduate, including those with little or no credit.

* The applicant can obtain 100 percent financing on a new or used car at interest rates afforded to "A" paper members.

* To qualify, the graduate must have accepted a job in his or her field of study.

* If the member has already started his job, we ask for a check stub as employment verification.

* If the member has not yet started work, we ask for a commitment letter from the employer.

* The graduate's salary must be sufficient to qualify for the loan, the debt ratio must fall within our standard guidelines, and there must be no derogatory information on the credit report.

Since the process of buying a car allows for some discussions with the buyer, cross-selling opportunities are many. Visa cards with small, starter limits; no-fee checking accounts; and debit cards are all cross-sold.

RESULTS SO FAR

In our experience so far, each promotion brings in 10 to 20 car loans. By giving new graduates a chance to establish good credit, we are hoping to have a lifelong relationship with them, and to see increased use of all credit union services.

To date, we have approximately 60 graduate car loans on the books, with an average balance of $15,000. On average, the graduates are also using at least two other credit union services in addition to the loan.

Since the inception of this program, there have not been any defaults.

While the program offers graduates a special way to apply for these loans and each case is evaluated individually, the limit of the loan is determined by ASI FCU's standard underwriting guidelines.

With improved marketing capabilities, ASI FCU hopes to reach more and more young professionals and, through this program, to become their primary financial institution.

Audrey Cerise is president/CEO of $170 million ASI Federal Credit Union, Harahan, La.

Copyright Credit Union Executives Society Aug 2003
Provided by ProQuest Information and Learning Company. All rights ReservedCerise, Audrey "Loan zone: Cars for graduates". Credit Union Management. Aug 2003. FindArticles.com. 16 Jun. 2008. http://findarticles.com/p/articles/mi_qa5328/is_200308/ai_n21334122