Lending Perspectives: Back to the future … with small loans?
Credit unions need to look for ways to make financing mid-range purchases easier for millennials and other members.
Over the last few years, we’ve definitely seen evidence that millennials look at credit differently than previous generations. They have significantly more student loan debt. They have delayed taking on a mortgage until slightly later in life. They are less likely to own a car and have a car payment.
They also seem to have turned back the clock almost 40 years on their view of credit cards and major purchases. When I started in the lending business 36 years ago, I was with a nationwide consumer finance company with almost 700 branches. Our bread and butter was financing purchases in the $500 to $2,000 range, mostly furniture and appliances, although I remember financing affordable used cars, early satellite dishes and a personal cooler for a “kegerator” from Beer Meister!
At the time, these purchases were really hard to pay for with a credit card. In the mid-1980s, even people with perfect credit rarely had a Visa with a limit over $3,000. Limits in the $1,500 range were much more commonplace, and not every creditworthy consumer had a card. Financing purchases in the $500 to $2,000 range was a huge market, with Beneficial, Household, Norwest, Avco, Security Pacific and any number of forgotten companies dotting the landscape in every town of significant size.
continue reading »