DETROIT—One Detroit Credit Union said it will expand an “Auto Bailout Program” that refinances existing high-interest auto loans that to date has saved more than $2 million for its members after discovering some were paying as much as 24% for auto loans.
Ove the past year, One Detroit reported it has refinanced more than 300 loans with an original average annual percentage rate of 14.1%. The average new rate on the loans refinanced by ODCU has been 6.46%.
The Auto Bailout Program is part of the credit union's long-term plan to be the primary financial institution for Detroit's neighborhoods, according to One Detroit. It said it has invested $10.3 million in the program and has helped nearly 600 people reduce their auto loan rates at least 50% since the Auto Bailout Program launched in 2012.
"To put that in perspective, nearly two-thirds of the loans we've refinanced had rates of more than 10%," said Hank Hubbard, One Detroit Credit Union president and CEO. "About a third had original rates of more than 18% and 10 loans had rates higher than 24%. There were cases where we cut someone's rate from more than 20% to lower than 5%."
In the last year the program reduced monthly payments an average of $54.16, or $3,476.43 over the life of the loan, according to the credit union.
"Without us, more than $2 million would have gone to predatory lenders outside of the community," said Hubbard. "It is better to keep those dollars in the community for residents to use at the local grocery store, to pay utility bills, buy the medicines they need and for other major items that will help improve their lives."
ODCU said its program helped many borrowers with high interest rates keep their vehicles. For many Detroiters, vehicle ownership is essential to finding and keeping a job as well as getting to stores that offer healthy food options.