Microloans make members for life

In the CUInsight article “Microloans Make Members for Life,” James Chemplavil illustrates how small-dollar loans—typically between $50 and $400—can have a profound impact on members' lives. These microloans offer immediate financial relief for low- to moderate-income individuals, helping them avoid predatory lenders and fostering long-term loyalty to their credit unions. By leveraging modern technology platforms and alternative data for credit assessments, credit unions can efficiently manage microloans at scale, reducing default rates and uncovering creditworthy borrowers who might otherwise be overlooked. This approach not only supports members in times of need but also strengthens the credit union's role as a trusted financial partner.

Moreover, microloans serve as a strategic tool for credit unions aiming to engage younger demographics, such as millennials and Gen Z, who often have subprime credit scores due to limited credit histories. The article highlights that 90% of microloan borrowers are 41 or younger, with a significant portion residing in minority-majority zip codes. Offering microloans aligns with credit unions' mission to promote financial inclusion and can aid in meeting Community Development Financial Institution (CDFI) or Low-Income Designation (LID) criteria. By addressing immediate financial needs and providing pathways to financial wellness, microloans can transform one-time borrowers into lifelong members.

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