New program enables lower-income people to refinance high-interest car loans

Katie ArnoldJP In The News, News, Other News

From the St. Louis Business Journal.

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By –  Reporter, St. Louis Business Journal

Galen Gondolfi of Justine Petersen


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.

Faulkner said Tuesday she has more money to meet her other monthly expenses.

“It’s really made a difference,” said Faulkner, an accountant who works for her nephew’s law firm.

The NISA Charitable Fund is an arm of Clayton-based NISA Investment Advisors LLC, which as of Dec. 31 managed $334 billion in physical assets and $195 billion in derivative notional value in separate account overlay portfolios.

“Nothing can happen without capital,” said Gondolfi. “If we don’t have capital, then this is only a conceptional endeavor. What’s terribly exciting is to have a progressive funder-investor like NISA.”

The $250,000 donation fits into the charitable fund’s mission centering around capital, primarily access to capital and development of intellectual capital such as workforce development, said David Eichhorn, NISA’s CEO and head of investment strategies.

“This was a neat opportunity to provide that access to capital for those who are underserved or underbanked, or disenfranchised via past credit history; folks whose circumstance is such that they don’t have easy access to capital for things that are critical, like a car, which is an enabler for a job,” he said.

Eichhorn said the NISA Charitable Fund hopes that other donors will join the effort.

“If this draws out other civic-minded companies or people to add to that capital, we’d love to hear it and talk to those folks to encourage them to think about it,” he said.