ST. LOUIS — Low- to moderate-income residents in the St. Louis area are tapping a new loan fund created by a community development financial institution to refinance high-interest car loans.
The NISA Charitable Fund has provided $250,000 for the program, which is being administered by the Justine Petersen Housing and Reinvestment Corp., a nonprofit group. The Drive pilot program, which began lending last month, also includes financial counseling to help repair credit scores.
“Research shows that those with subprime credit in St. Louis are paying an annual interest rate of approximately 20% for their auto loan, which consumes a disproportionate share of their monthly income," Robert Boyle, founder and CEO of Justine Petersen, said in a written statement, referring to a St. Louis Fed study.
The program enables selected participants to refinance their auto loan at an annual interest rate of 6%, representing significant monthly savings, said Galen Gondolfi, chief strategy officer for Justine Petersen. The program also is designed to help people build assets, he added.
“It’s this idea of latching on to the credit report and the credit score, raising that score and graduating the client to mainstream finance – not only for a future car purchase but home ownership,” Gondolfi said.
So far, Justine Petersen has closed seven loans to refinance high-interest car loans totaling $92,411, for an average loan size of $13,201.
Katherine Faulkner, a north St. Louis resident, refinanced her car note with a Drive loan, lowering her annual interest rate from 20.3% to 6%, saving over $120 per month.
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