Improving financial resilience in Liverpool
Almost 90% of loan applications to Central Liverpool Credit Union (CLCU) are made by members living in the top 20% most disadvantaged areas.
Members’ vulnerability reduces when they receive a loan from the Credit Union.
Firstly, the interest rate lower.
Secondly, loans are granted on the basis that a member saves as they repay. Consequently, savings and therefore financial resilience improves.
People who’ve been members of the Credit Union for two years have a savings to loan ratio of £1 to 20p. In other words, for every £1 borrowed they have 20p in savings.
That leaps to a ratio of £1 to 50p after five years membership. This helps CLCU members achieve their number one money goal which is to save more.
At CLCU, like all other credit unions, we have strong social objectives that we take seriously, it is, after all, part of what defines us. One of these objects “The training and education of Members in the wise use of money and in the management of their financial affairs” makes it incumbent on us to educate our membership in the wise use of money.
As a responsible lender we ensure that we consider the wider financial circumstances of individuals and, where necessary, offer access to advice and support on issues such as debt, budgeting and saving to help improve our members’ longer term financial situation.
Our use of NestEgg has proved invaluable in assessing the affordability of any loan offer we make to a member and provides us with a tool to support the member by “nudging” them into better budgeting , helping them increase their credit score and providing a step on the path to financial stability.
Eileen Halligan, CEO
Better informed decisions, reduced bad debt
As a community development credit union CLCU aims to help as many people as possible. Therefore, to accommodate the higher risk profile of members, the NestEgg Decision Engine is configured to refer rather than decline people with defaults and CCJs.
However, affordability rules are drawn more strictly.
This results in fewer automated accepts or declines. But more ‘refers’ isn’t a bad thing. They encourage intervention by a Loans Officer. Helping the member better understand their budget, access support where necessary and establish a savings plan.
These are financial wellbeing interventions during the loan application process. As a result, the resilience of members improves, and loan arrears fall.
Here at CLCU, our previous decision engine only gave us credit scores. We wanted to focus more on affordability and indebtedness, rather than just a score that’s based on historical data that may not be indicative of an applicant’s current circumstances.
NestEgg gives us that score and the history but also quickly shows whether the applicant is relying too heavily on debt. We can also see at a glance how the person manages their money through the simple 50/30/20 graphics. If we have any questions, we can drill down to the detail if required.
As a result, our decisions are better informed and, hence, our bad debt has reduced.
The data NestEgg provides also allows us to discuss in detail and advise how a member can improve their chances of getting a loan, or how better to manage their money.
Geoff McKay, Business Development Officer