Some potential members may be unable to access mainstream finance because they have either a poor credit history or no credit history, giving them a credit score that would not be sufficient to meet the requirements of a low rate loan provider. As a result, they need to resort to borrowing from loan sharks or lenders who charge 4 figure interest rates. This in turn makes it expensive and difficult to afford and can lead to further delinquency and a worsening credit record and score. It creates a perpetuating cycle that is difficult or sometimes impossible to break.
We are looking for ways to help people to break that cycle and begin to improve their credit record and so increase their score.
The aim is to provide a loan to the member that will:
The idea is to provide the member with access to a loan that will evidence their ability to meet their repayment commitments. That will then create a record of consistent and affordable repayments with the Credit Referencing Agencies. In time that should improve their credit rating and bring them back into the mainstream financial market.
It will also establish trust from us as a lender and provide a platform for continued support with further loans on a more commercial basis.
Sure, we hope that they would continue to borrow from the credit union, but for certain, it provides members with improved choice and viable options in their future financial planning.
Loan performance data will be shared with our current CRA partners. This will help establish and improve the individuals credit score.
These loans will be initially targeted at care leavers aged between 18 and 25 within the field of membership criteria
These Members will be given a chance on this product to improve their credit scores and will be members who we would not normally lend to because: