Making ends meet may become less of a struggle for Pierce County residents who otherwise pay high interest on their auto loans.
Harborstone Credit Union received a $776,000 Community Development Financial Institution award from the U.S. Treasury Department and, working with financial counselors at a Sound Outreach, has developed special financial products for struggling households.
If someone has no credit or poor credit, it can be difficult for them to find a financial institution that will provide them with loans. Many people believe their only option is a high-interest loan from a “buy here, pay here” auto dealer. People in this situation can end up paying more than double the value of the vehicle and 18 percent to 29.99 percent in interest.
“Our financial counselors see folks paying $550 per month for their vehicle, all because they have a low credit score,” said Sound Outreach Executive Director Jeff Klein. “Credit scores are key in our country. Without a good one, you pay more money for loans and car insurance premiums. That same person paying $550 per month for their car might also be paying 700 percent more than you or me for car insurance too, all because of their credit score.”
Klein says people living on the edge of financial hardship often will pay their car payments before any other bill because they could always live in their car if they can’t pay rent and they need their cars to shuttle their children and drive to work or job interviews. That’s where Sound Outreach’s Credit Up team comes in. Credit Up financial counselors meet one on one with individuals, free of charge. Counselors pull and review credit scores, assess finances, work with individuals to dispute or resolve collection items, develop household budgets, and help people identify their financial goals.
Even if someone has poor credit or owe more than the value of their vehicles, Harborstone may be willing to refinance their loans if the borrowers are willing to meet with a Sound Outreach financial counselor to work on their finances.
Sound Outreach created its own loan guarantee fund through donations and tested the process on a few high-interest loans. One single mother with her own cleaning business was able to lower her interest rate and save $191 per month on her loan and $6,500 in interest over the life of the loan by refinancing through this program. Another woman with a credit score in the 500s and an older vehicle was able to refinance with Harborstone and reduce her monthly payments by $100.
Now, with backing from the CDFI award, Harborstone and Sound Outreach are gearing up to provide hundreds of more loans to those who are eligible. “We want to provide a benefit to the communities we serve, and I think that with products and services like these, we can accomplish this goal. People need to be given a better opportunity to succeed. The CDFI grant and our partnership with Sound Outreach will allow us to really make a difference,” said Phil Jones, president and CEO of Harborstone Credit Union.