SEATTLE — Having bad credit can trap people into accepting loans with interest rates as high as 33%. Often families in that position have a difficult time ever getting ahead on their payments. Restart Auto Refinance, a partnership between Harborstone Credit Union and Sound Outreach, can help. Families who participate in the program can get their loans refinanced for a new interest rate of around 14% with the completion of credit and debt counseling with Sound Outreach.
This counseling can help families get out from under debt, and even refinance for a better rate in the future. Vice President of Community Development at Harborstone Credit Union, Mark Minickiello, and Executive Director of Sound Outreach Jeff Klein join New Day Northwest to talk about this amazing program.
"Harborstone is a not-for-profit cooperative," Minickiello said. "We're also a CDFI--community development financial institution. We have a mission of service to low-income people, but it allows us to compete for government grants, and we were able to get a grant in 2017 to work with Sound Outreach...this is one of the products as part of that partnership that allow us to really accelerate people's financial empowerment."
The Restart Program allows people to move themselves to a better place financially, according to Klein.
"We [Sound Outreach] were kind of a normal nonprofit serving people with things like access to public benefits. I just started to wonder how we can help people avoid getting to places in their lives where they need to access food banks or use food stamps," said Klein, "So we started a financial counseling program. Our counselors meet one on one with individuals and work on their credit scores, work on reducing debt. We realized there were a lot of people who could benefit from a loan, but had insufficient credit, or their vehicle loan, for example, was way underwater. So we needed a financial institution partner to do that."
In order to teach people how to manage themselves financially, Klein said that removing barriers was the main factor.
"Our counselors would be in these conversations with people, and creating relationships over time," he said. "They could help people understand how to boost a credit score and what that means for their finances. If an APR loan comes down, you can save a couple hundred dollars a month. If you reduce your debt, you just have more ease in your life."
Klein also noted how it is becoming more difficult for Pierce and King County residents to make ends meet as the cost of living continues to increase.
"We looked at things like how much you spend on check cashing fees if you can't access a bank account," he said. "People can spend up to a thousand dollars a year. And they're already low income, so that costs a lot of money. We looked at these vehicle loans that people are paying--six hundred dollars a month at 29 percent interest. So how can we help those folks when the value of their loan is $20,000, but the car is only worth ten thousand?"
Minickiello said a consumer's experience is straightforward when they work with Harborstone.
"It's kind of a wraparound experience," he said. "They'll work with a Sound Outreach counselor, and then they're matched with products underneath this grant that help that counseling progress. So many people fell into high-interest loans around the time of the recession, and it's a spiral that's hard to dig out of. So while they're working with a counselor from Sound Outreach, we can refinance their high-interest loans because we're working in this partnership. It doesn't matter that they have a low credit score, they've shown that commitment to work on that with a Sound Outreach counselor."
The intent is to free up some money within a client's budget so that they can continue working on improving their credit, Minickiello said.
Both Minickiello and Klein emphasized just how much a person's credit score can affect multiple areas of a person's life.
"Most people don't know that your credit score is even tied to your car insurance premium," said Klein.
This story is sponsored by Harborstone Credit Union. Watch New Day Northwest 11:00 weekdays on KING-TV Ch.5 or streaming live on KING5.com. Connect with New Day via Facebook, Twitter, Instagram.