I was just talking yesterday with one of my friends from Europe about the process of obtaining loans within the U.S. She told me that doing credit checks is so much less common in Germany, especially when people are buying cars. For one thing you can buy a car for about a thousand euros (about $1300 U.S. dollars) which is incredibly rare in the states, but for another the way the banks operate in Germany is they expect the borrower to have at least 50% of the money that they are borrowing already tucked away in their savings. In that sense they see no need to check credit, because their guarantee is that the borrower can pay at least half of the loan by wiping out their savings account. We went on to discuss the lack of understanding of credit within the U.S., and the trouble the housing market got into by handing out mortgages left and right to people who really shouldn’t have gotten them. Which brings me to today’s article. It is about a non-profit company called Ways to Work which is centered on helping low-income and working class families achieve low-interest car loans by educating them on credit and helping them clean up their history. And those two things, in my opinion, are truly the keys to bettering the credit situation within America. Check out this great article by Niala Boodhoo of WBEZ 91.5:
“Bronzeville resident Kelly King works as a security guard downtown. She has two kids: her daughter just started college and her son is in the eighth grade.
They had a car up until last year. But then, Kelly’s daughter had a chance to go to Italy and France for her senior trip. Her car payment was $305 a month. But she was juggling that with making payments on the trip, and as she said, “pretty much had to choose”.
“The car ended up getting sacrificed for her trip, for school,” King said. After she missed four payments, they repossessed it.”
Click here to read about the struggles of some middle class citizens to get a low-interest loan, and the role in which Ways to Work plays in helping make this goal a reality.
And there you have it. A very intelligent solution to the dilemma of low-income families needing cars but perhaps not having good credit and being subject to interest rates they could never afford, while teaching credit smarts and helping folks clean up their credit history and knock out debt all in one fell swoop. Bravo, Ways to Work! Keep up the good, er, work.