DALLAS – Credit unions know there are some good credit risks among their members with lower credit scores. Until now, they haven’t been able to identify them.
Allied Solutions, in partnership with Capital Lending Strategies, LLC, created a program that enables credit unions to identify members who, though they may not have high credit scores, probably are good risks.
“It gives credit unions the ability to help members re-build their credit scores with reasonably-priced loans,” said Dick Hetzel, executive vice president, Allied Solutions. “It also makes good business sense for credit unions because Alternative Lending takes some of the risk out of loaning money to so-called `high-risk’ borrowers.”
Alternative Lending software works on the assumption that many borrowers with lower credit scores may be good risks; the low score is the result of a patch of bad luck or represents spending habits that have been corrected. By looking at several hundred variables in a person’s credit history, the program identifies those who are likely to be a good risk going forward. Consequently, the credit union can charge the borrowers lower rates for loans than they would find elsewhere. And, because the buyers are pre-approved, they are more attractive customers in the eyes of auto dealers.
Alternative Lending also includes collateral value insurance (CVI), which lowers the credit union’s risk in the event of a default. CVI insurance reimburses the credit union for the difference between the amount generated by the sale of a repossessed vehicle and the amount owed by the defaulting borrower. Additionally, credit unions can earn a partial refund of the up-front CVI premium: The lower the default rate on the loans made under the Alternative Lending program, the larger the experience-based refund.
“Everybody wins with Alternative Lending,” said Hetzel. “Credit unions can write more loans, serve more members, and earn more loyalty from their members. Borrowers with low credit scores get lower interest rates and more buying power.”
Allied Solutions provides insurance, lending and marketing products and services for financial institutions and their members. Its alliances with high-quality providers help Allied Solutions’ financial institution partners increase profitability, reduce risk, and provide superior service to their account holders. The company maintains 21 regional offices around the country and corporate headquarters in Indianapolis, IN and Dallas, TX. Allied Solutions is an independently-operated affiliate of Minnesota Life Insurance Company, St. Paul, MN.
