How Do QCash Small Dollar Loans Help Member Health?

Payday loans have not been received very favorably recently, by either the general populace nor by the legislature. And yet, at QCash, we still see small dollar loans as an important aspect of credit union member health. Why do we continue to hold this viewpoint?


We understand that financial health means different things to different people. Recently, we read a study that claimed that around 44% of Americans couldn’t come up with $400 cash in an emergency. To us, this indicates that most Americans do not have access to an extra influx of money to aid them with anything that might come up. While we might most often think of financial health as a product of income, savings, wealth management, and planning for the future, we know that for many people it means having flexibility and options. They want to know that, regardless of their cash flow, if something comes up that requires a little extra money, they’ll be able to take care of it.

Financial Health is a Road Trip

Everyone’s destination is a little bit different. In the game of Life, some of us want to retire to Millionaire Estates, while others want to retire to Countryside Acres. How we get there will differ, and how the game ends may also be a little different, but in the end, we’re working toward the same goals: a happy life with enough financial stability that can last us.

The road to financial health is also littered with obstacles, pit stops, detours, and—we hope—a few great restaurants. We keep in mind that many hard-working, responsible Americans sometimes struggle to cover sudden costs or loss of income stemming from medical emergencies, car troubles, and job transitions. In such times, it’s better to have options. Safe options. Options that don’t come at the predatory rates endemic to payday loan centers. Options presented by the same people who provide their other banking services. Options that come with the comfort and security that only their credit union can afford them.

Each member’s route to financial health is unique, so we want to offer as many possible routes to success as we can. Whether someone needs it or not, having access to an emergency small dollar loan has helped thousands of credit union members per month. It’s not just for the foreseeable obstacles that pop up—it’s for the nasty surprises. Members can get small, fast loans when they need them most.

Institutional Health

 At QCash, we also consider small dollar loans a boon to credit unions. It expands the portfolio of services that they can provide, and it keeps credit union members from jeopardizing their financial health by pursuing loans at less-reputable payday loan centers.

We’ve proven that the loans we provide, at the rates we suggest, are a net positive for credit unions. Our service is faster and requires less overhead than traditional payday loan services, which allows us to offer little lifelines to those in need. Nevertheless, we emphasize the financial health of your members, because we understand that healthy members mean a healthy credit union.

 

Are QCash and Payday Loans the Same Thing?

What are the Benefits of Credit Union Payday Lending?

Comment on this post

Buy vs Build?

July 30, 2018
by Ben Morales, CEO QCash

Why would a credit union make their own payday lending platform versus using the QCash platform?

I’m often asked, “Why wouldn’t a credit union just do this on their own versus using the QCash platform?”

The bottom line is, what we want from QCash Financial is everyone to deliver small-dollar lending.

Credit unions need to get back to our roots of where they began. Credit unions started by delivering small-dollar loans to their members, and we’ve gotten away from that over time. At the end of the day, we just want everyone to get back to providing for their members. Above all else, this is a means of really eliminating predatory lending. We know credit unions have a lot of things to think about with regulatory concerns, member implementability, and member need. If we can help make this an easier and quicker process to implement, then we would say, “That’s why you should use us.”

QCash has over 14 years of experience with running a small-dollar loan program, which we bring to the table to help credit unions manage their small-dollar loan programs. QCash wants to make sure it’s helping them in achieving their member goals, their mission goals, and their margin goals. We’ve specifically built that in as part of our program to create this platform for credit unions. That’s our differentiating factor.

Credit unions have delivered and created small-dollar loans since the beginning and are still doing that today. There’s one or two out there that are also doing what QCash is doing, but they haven’t added the automation parts of it. Leveraging that automation to lower the cost so that you can deliver this to a broader market is key.

Scalable

The issue that we have today is that the solutions in the market aren’t scalable. You can’t deliver thousands of e-loans to the members that need it in the time that they need it with conventional underwriters and systems. It’s a slow process. Most systems right now are using traditional methods, they’re using underwriters, they’re pulling credit. Let’s just remember how many credit invisible, thin-file members with no credit, or thick-file people that truly need these loans will be excluded if we use credit score. It’s a great start but they need to advance to really serve the market. If they really want to get small-dollar loans to the consumers that need it, they need to change their method.

Members: “Thin File” or “Thick File”

This is a great first-time opportunity for thin files. A thin file is typically a member that possesses no credit as they stand currently. Thick file is someone who has probably gotten into a little bit of trouble and hasn’t been able to manage their finances adequately. They would possess quite a bit more credit than a thin file. Small-dollar loans are a great opportunity to pull them back into the fold and begin to coach them into being able to have access to more affordable financial services.

QCash Financial has seen firsthand some of the benefits for thin/thick-file clients. At WSECU, a number of members are millennials whose parents were members initially. Ideally, part of their first loan would come from QCash as a way to solve a problem of, “Hey, my car engine blew up, and I need a new car engine,” or, “Hey, I have this medical situation, a dental emergency that I need to attend to,” or “Hey, I have this pet emergency that I’ve got to solve.” QCash would be the means through which they receive the necessary funds to deal with these emergencies.

Typically, from a younger perspective, it’s one of those emergency situations that says, “Where do I get money from?” People first go to their family, but if that’s not there, they’ll use a QCash small-dollar loan to do that. That’s where the member service reps will educate them and inform them of the product availability.

Ultimately, the hope is that QCash Financial will be able to provide small-dollar lending to all credit unions because it is a safer and more efficient process that is easy to implement.

Read more here.

Comment on this post

The Four Elements of Financial Well-Being According to the CFPB.

Four Elements of Financial Well-Being CFPBThe CFPB or the Consumer Financial Protection Bureau recently published a report titled “Financial Well-Being in America” that discusses the four elements of financial well-being, and how Americans of different income levels display varying levels of financial wellness. Two of the CFPB’s most important conclusions from the study are that “savings and financial cushions provide the greatest differentiation between people with different levels of financial well-being” and that “certain experiences with debt and credit seem to be strongly—and negatively—associated with financial well-being.” Credit unions must understand the four elements of financial well-being and how to help improve the borrowing and saving experience for members to help boost their financial wellness.

The CFPB report “Financial Well-Being in America” defines financial well-being as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life.” It further describes the four characteristics as the following:

  • – Present Security: Control over day-to-day and month-to-month finances
  • – Present Freedom of Choice: The freedom to make choices to enjoy life
  • – Future Security: The capacity to absorb financial shock
  • – Future Freedom of Choice: The state of being on track to meet financial goals

These four elements address present stability in two categories, which directly impact future financial stability. Members must first be able to keep their daily or monthly expenses in line with their income, in order to save for unexpected expenses in the future and meet financial goals that improve quality of life, such as saving for a home or investing in a more reliable form of transportation.

To help members improve their financial well-being, credit unions can provide members access to tools to control day-to-day and month-to-month finances by borrowing and saving more effectively. Members often need access to the ability to borrow to manage daily and monthly expenses. According to the CFPB, inexpensive, small-dollar loan products can help stabilize members in the short-term. Without these alternative loan options, many members risk falling into a cycle of debt through high-interest payday loans or by accruing large credit card balances with high interest rates. Credit unions are uniquely positioned to offer these small-dollar loan solutions to members because they are invested in the long-term financial stability of members, instead of looking for a quick profit.

In order to improve a member’s financial stability enough to start saving, credit unions need to build support for savings. Integrating financial coaching and debt-management counseling services into small-dollar loan products can help members make good decisions throughout the borrowing process. The ability to borrow strategically can directly lead into the ability to save, especially with the guidance of trusted credit union financial coaching professionals.

When members turn to a small-dollar loan product offered by a credit union to solve a short-term cash management crisis, the credit union has the opportunity to offer help to build a savings plan once the member’s income has stabilized.

The CFPB’s report on financial well-being indicates that access to savings and financial cushions is one of the primary indicators of financial wellness and stability. Credit unions should work with their members who struggle with their day-to-day and month-to-month expenses to build a plan to stabilize their income and expenditures. By offering access to small-dollar loan products, paired with financial coaching and savings tools, credit unions can help members improve their financial well-being.

Related Posts

How does the new CFPB Small-Dollar Loan Rule Impact Credit Unions?

Small Dollar Loans and Truth in Lending Disclosures


By Ben Morales, CEO of QCash Financial [12.11.2017]

Ben Morales is the CEO of QCash Financial. QCash Financial is a CUSO providing automated, cloud-based, omni-channel small-dollar lending technology that enables financial institutions to provide short-term loans quickly to the people they serve. QCash Financial, a wholly owned subsidiary of WSECU in Olympia, Wash., started as a short-term loan solution for the credit union’s members in 2004.

As published by:

CUNA Councils
P.O. Box 431
Madison, WI 53701-0431
Phone: (800) 356-9655

Comment on this post