Smart Solution
By Joyce Moed, Reporter

COLORADO SPRINGS, CO–Air Academy Federal Credit Union is offering a new loan product called Smart Solution.

"We have a lot of payday lenders in our area," said Karin Kovalovsky, vice president of the Academy FCU.

She said the credit union wanted to be able to offer people an alternative to using a payday lender, which can cause an endless cycle of loan repayments.

The Smart Solution loan will grant borrowers three $300 loans. The only catch is that they have to pay off one loan before receiving another, so that the borrower never has more than one outstanding loan with the credit union. There is a $30 application fee with each loan, and an 18% APR. After three $300 loans are paid within the terms, the borrower may then apply for a $500 loan. There are no credit-history checks required, and approval decisions are made instantly. The borrower must apply for the loan in person.

"We hope by getting a face-to-face, we hope to get a better understanding of their financial concerns and we can help them," Kovalovsky said.

The credit union also offers a financial education program. If the borrower completes the program, they can be refunded $15 of the application fee, one-time only.

A typical payday lender loan charges a $20 fee for every $100 borrowed, and the loan must be paid within two weeks, Kovalovsky said.

AAFCU also offered financial and budgeting counseling over the telephone, however it is not a requirement for borrowers.
"However, if a member comes in for a loan six times within a 12-month period, the counseling is required," Kovalovsky said.

The criteria for receiving the Smart Solution loan is that the borrower must have been a member of the credit union for a minimum of six months, and they have to verify an income at least $1,000 net or $1,200 gross. And that have to be at least 18 years old.

It is still too soon to report customer feedback from the Smart Solution loan, Kovalovsky said, as the program just began in April "with a slow launch."

But AAFCU is working hard to make sure people know the loan is available.

"We will be distributing fliers to military bases, and putting ads in the local newspaper," she said.
Though the new loan will be marketing throughout the area, it is not being intended to be used as a way to gain new CU members, Kovalovsky said.

"It's just another way to provide a service to our members," she said, "while helping them avoid going to a payday lender and creating a cycle they can't get out of."

So far, 28 people have taken advantage of the new Smart Solution loan.

"And nine have come in to use it for a second time." Kovalovsky said. "So obviously there is a need for it."

Originally the credit union only served the military, but today it has members from 10 school districts, too.

One surprise noticed since the Smart Solution launch is that many members taking advantage of the loan are not members of the military–the group for which the loan was originally designed.
"Of the 28, only 15 are actually military," Kovalovsky. "That just proves that anyone can be short on cash flow for whatever reason."

The credit union does not ask the reason the loan is needed.

Fifty-three percent of the AAFCU's 45,000 members are military-based. The credit union has $302 million in assets.

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