Conventional wisdom suggest that baby boomers are moving from the borrowing stage to the saving stage of their lives. While this has traditionally been true of consumer behavior, this generation may very well be a contradiction. According to a recent survey conducted by the Pew Research Center, “55% of baby boomers say it is likely that their incomes will not keep up with the cost of living over the next year.”
One area ripe for reform in a baby boomer’s life is the vicious cycle of purchasing new cars every year or two. Among credit unions surveyed, the average length of time an auto loan stays on the books is 26 months. This causes problems for both the lender and the credit union.
The Interest Refund Loan is designed to end the rapid trade-in cycle, assure the loan stays on the credit union books, reward the borrower for loyalty to the credit union, and set the borrower on the path of fiscal responsibility.
With the loan, the borrower is promised a return of all the interest he or she pays in the final year of the term of the loan. If the member ends the loan relationship early, the interest refund feature becomes void. Several variations of the offer are possible, depending on the preferences of the individual credit union.
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