TOOL 6, Part A: - Prosperity Now



Assessment of Community Services ProvidersFor each organization you identified in Tool 5, use the questions in the left column of the tables below to collect information about that organization as it relates to the provision of the credit-building services/products. In the bottom portion of the table, analyze whether your target clients could access these services/products, and if they would be a good fit for them. Then determine whether the organization should be a candidate for referral or partnership, noting any key points to consider or follow-up needed. Organization Name: Contact Person:Who conducted this assessment and when?TOOL 6, Part A: Information About the Organization’s Services/ProductInformation About The Organization’s Services/Products What credit-building service(s)/product(s) does your organization/program offer?Client FitHow long have you been providing this service/product?What eligibility criteria do clients need to meet to receive this service/product (e.g., income level, geography, age, credit score.)?How can this service/product be tailored to young people aging out of the foster care system?What are the qualities/ characteristics of the ideal candidate for your service/product?Client AccessIs there a cost to access and use the service/product? If so, what is it?How are services/products provided (e.g., walk-in, regularly scheduled times, online, etc.)?Where can participants access your services/products (e.g., physical address, online, etc.)?What days/hours are these services/products available?Could you provide services/products for our clients at another location?What should participants bring with them to their first appointment (identifications, etc.) Product Safety (see the table at the end of this tool for guidance accessing product safety)What is the interest rate on this product? Is it fixed or variable? Is there a deposit for this product? What are the restrictions on when and how this product can be used? What type of fees are associated with this product (application, prepayment penalties, late fee)? What are the estimated monthly payments? Is the creditor a credible company? Additional Considerations Unfortunately, there are not always bright lines to help us determine which products are safest because there are so many products out there and because the credit profile of an applicant may dictate the terms they are offered or what products are even available. Keeping that in mind, below is a list of good signs for different products and potential red icGood SignRed FlagNoteInterest RateFixedVariable“Effective APR” is not always synonymous with “annualized interest rate.” Instead, an effective APR calculation includes some—though not all—of the fees and charges associated with a loan, as well as the interest to be earned over the term of a loan. Whether an APR is good or not often depends on the type, size, and provider of a credit product. For example, the effective APR of small dollar (usually $1,000 or less) loans (payday or installment) should not exceed 36%. For other types of credit products a "good" interest rate also depends on the source of the credit. For example, someone getting a car loan through a credit union, even if they don't have great credit, is likely to get a much better rate than someone getting it though a car dealership that advertises financing to people with "no or poor credit." As far as credit cards go, if you can find one for around 10% that's usually a good deal. DepositFunds returned upon proper completion/account closureNo or no transparency around any fees that may be deducted from depositLoan UsageClear articulation of any restrictions prior to applicationRestrictions imposed after application fee paidThere is no inherent red flag in a "special purpose" loan—many nonprofit lenders place restrictions on loan usage and even make note of it in loan agreements. The key is transparency upfront so the client understands what they are signing up for.FeesApplication OR Origination fee but not both.Fees that seem duplicative or excessive!Prepayment penalty feeNo transparency around feesFees should be expected. It is common that lenders charge either an application or origination fee, along with a late fee if you pay late or miss a payment. But when there are fees that seem repetitive, excessive, or there are prepayment fees, prospective borrowers should proceed with caution. Estimated monthly paymentsInstallment loans: consistent and amortized over term, comfortably fit into monthly budgetLender doesn't use any sort of "ability to repay" testThe CFPB has finalized an ability-to-repay test for payday and small dollar installment loans with some exceptions and concerns from consumer advocates that it isn't clear and doesn't go far enough. Advocates would like to see a cap at 5 percent of a borrower's paycheck, but many reputable nonprofits that aren't subject to this CFPB rule use different standards like a certain percentage of gross or net monthly income. Bottom line, does it fit in the budget? The best way to prep clients is to impart some basic best practices: 1) use only as needed and/or strategically once a month to purchase something already in one's budget just to keep it active and 2) keep outstanding debt balances below 30% if possible at all times.CreditorCredit UnionNonbank nonprofit community-based lenderNationally recognized and credible lender/bankCar dealerships that finance their own loansPayday lenderFor profit finance companiesTraditional and nationally recognized banks have not always been responsible with their lending products. The key is in those cases to research options and look at all of the above issues in combination to make the most informed decision based on the best options available. Sometimes there are no good options, which is part of the challenge. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download