Refugees given small loans to buy a car as they build a new life in the United States are more likely to pay back those loans at a higher rate than their credit scores might suggest, a new brief by the humanitarian organization International Rescue Committee (IRC) found, lending a way to higher rates of economic stability.
The report, Escaping the subprime trap: Lessons from auto-lending to refugees on the fast track to economic integration, found that refugees repaid affordable auto loans at 98 percent, which is “significantly better” than the national average of 88 percent among similarly-situated borrowers. Compared with the national subprime auto loan 60-day delinquency rate which hovers around 5 percent, the IRC’s portfolio has 0 percent delinquency.
Resettled refugees arrive without credit records, a necessary qualification to receive affordable loans, buy homes, and purchase cars. Like many of their low-income American counterparts, low credit scores puts refugees in a position susceptible to loan sharks and unscrupulous dealerships who approve of loans with shockingly little due diligence, trapping them in a cycle of high-interest loans.
Some of these “Buy here, Pay here” auto lenders, which handle their own financing, draw low-income people to take on high-interest loans. But when borrowers are unable to make their payment, dealerships get aggressive with repossession and can use “starter interrupter” technology and GPS tracking to to turn off cars. Only four states have regulations governing this kind of technology, CBS News reported.
Cars, then, quite literally become “wheels of fortune.”
For that reason, the IRC loan program helps to ensure refugees don’t default on their loans. As part of their borrowing process, refugees can take out loans only after the IRC verifies their income, or if they can present documentation of a job that would allow them to make the appropriate monthly payments. Refugees are also set up with financial coaches, receive financial education training, and set up a family budget. That kind of review “leads to careful decisions about readiness to take out the loan,” according to the brief.
The IRC has four offices that offer the “financial capability” program — San Diego, Phoenix, Oakland, and Salt Lake City — where refugees take classes to learn about credit and create goals to afford loan payments. The organization currently has anywhere between 12 and 15 financial coaches. Another program is planned for the Atlanta office. The average auto loan payment that refugees take out through the program is about $160 per month, Kasra Movahedi, the director of the organization’s Center for Economic Opportunity, said.
The successful repayment rate isn’t surprising for Movahedi who has worked with refugees since 2003. He has seen firsthand how being uprooted as part of a mid-life disruption forces refugees to take on “extreme work ethics.”
“In my experience, refugees are extremely hard working,” Movahedi said in phone interview last week. “If you think about it, it makes a lot of sense. Many of us have the luxury of having lived here all our lives and having slowly built the foundations of a livelihood over many years. Refugees don’t have that luxury. They had their lives disrupted mid-stream.”
“What I’ve seen if anything is this initial anxiety: ‘how can I rebuild.’ It seems so daunting at first. After 1.5 years, two years, you see that extreme work ethics, manifests itself as extremely hard work,” Movahedi added.
One of the cases that IRC took on include Farhad Yaqoobi, a 24-year-old refugee from Afghanistan who was resettled in the San Diego area less than a year ago. With IRC’s loan payment of $7,600, Yaqoobi has been able to buy a used car, attend classes, work as a dental assistant, and take his parents where they need to go. He pays $190 every month.
“This car really changed my life,” Yaqoobi said.
“Farhad is absolutely the norm,” Movahedi said. “This is precisely the case we see. For our auto loans, we tend to focus more on the aspects of employment and how it helps to expand the geographic scope of your job search if you’re looking for a job or helps you work more hours. It’s about financial security.”
“He’s able to color in all the myriad ways that having a vehicle can help make life easier. It connects back to what I was saying. We were able to give Farhad a small amount of money and a little bit of training — and he is paying back the money — it is not a handout. And he is taking it and running with it to support his entire family.”
Movahedi said that the loan repayment program could act as a good model for other nonprofit organizations to help low-income families.
“Families live on thin margins and if an unexpected expense comes up, it could create a catastrophe because there’s no savings and there aren’t affordable credit cards to offset that and provide liquidity,” Movahedi explained. “That just makes the journey that much more difficult.”
“If you don’t fall down, you’re not able to stand on your own feet,” Yaqoobi said. “So every step of life that’s a challenge, we have to accept it and never give up.”
BitConnect Investment Opportunity
The moment you acquire BitConnect Coin it becomes an interest bearing asset with Up to 120% return per year through PoS minting. All you have to do to earn with this method is to hold coins in your Bitconnect-QT wallet. This means anyone holding BitConnect Coin in their wallet will receive interest on their balance in return for helping maintain security of the network.Learn more. This investment option involves profiting from the rise in price over your investment time period.
You can invest BitConnect coin in Bitconnect lending platform exclusively from the BitConnect Dashboard. This investment option involves profiting from Bitconnect trading bot and volatility software. You will receive daily profit based on your investment option. Upon investment term completion, you will receive your capital back to take out from the bitconnect lending platform or optionally reinvest back in lending platform to continue receiving daily profit. If you wants to invest in BitConnect lending, you have to buy BitConnect Coin in the first place. Buy BitConnect coin from BCC Exchange with Bitcoins first.
This investment option can be used to profit on price fluctuation of BitConnect Coin. You can buy BitConnect coin at a lower price and selling them at higher price. You can also profiting from downward movements in BitConnect coin price by selling them at a higher price and buy them again at a lower price and pocketing the price difference. If you wants to profit from short selling, you have to own BitConnect Coin in the first place.