Loan program road to financial stability

NEW RIDE: Sherlie Martinez and her daughter, Akemi, 5, of Cranston, with the 2013 Kia Optima that Martinez purchased with one of the first loans provided a new car loan service from the Capital Good Fund. / PBN PHOTO/ MICHAEL SALERNO
NEW RIDE: Sherlie Martinez and her daughter, Akemi, 5, of Cranston, with the 2013 Kia Optima that Martinez purchased with one of the first loans provided a new car loan service from the Capital Good Fund. / PBN PHOTO/ MICHAEL SALERNO

Twenty-six-year-old Sherlie Martinez hasn’t had much luck with cars.

Her first car, a 1996 Nissan Maxima, had a tendency to break down when she needed it the most. Whether she was dropping off her daughter, Akemi, 5, at day care, driving to work at the R.I. Traffic Tribunal or traveling to the Community College of Rhode Island for class, her car would stop working and the day would come to a halt.

But the luck of Martinez, a single mother, could be changing. She recently purchased a 2013 Kia Optima, becoming the first-ever recipient of a car loan from The Capital Good Fund, which recently launched a car-loan program designed for low-to-moderate-income families.

“It’s been a lifesaver,” Martinez said. “Having this car is so big for me, my life and my family.”

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The Capital Good Fund is a nonprofit that provides Rhode Islanders with low incomes with financial services, small, personal loans and financial coaching. Last month it added car loans to its repertoire. The new car loans range from $8,000 to $13,000 with a five-year term carrying interest rates of between 9 percent and 15 percent.

Andy Posner, founder and CEO of the Capital Good Fund, says qualified borrowers could save from $5,000 to $9,000 in interest and fees compared with predatory loans from subprime auto lenders, which many of those with low-to-moderate incomes turn to when viable financing options are scant.

“While banks and credit unions do car loans and you can get a great rate, if you don’t have a prime credit score or income you can’t get a loan,” Posner said. “So you go to J.D. Byrider or a buy-here pay-here payday lender who sells you a [clunker] car and provides you the finances with high rates at about 18 percent, making the loan worth more than the car.”

Martinez first came to The Capital Good Fund in 2011 for financial coaching and then again in 2013 for an emergency loan she needed to pay off a payday loan she couldn’t keep up with that was ruining her credit. Payday loans in theory are relatively small loans designed to be paid back quickly.

But according to the Consumer Financial Protection Bureau and the Pew Research Center, 80 percent of payday loans are followed by a second loan taken out within two weeks and borrowers typically spend about five months paying them back along with an average $520 in fees on an original loan of $375.

“It’s a vicious cycle and it gets you,” Martinez said. “The Capital Good Fund has taught me a lot. As a young mom, I wasn’t aware of what having good credit meant. But my daughter is going to college and I’m going to have to help her with student loans, so if I don’t start building credit I’m not going to be able to do that.”

The Capital Good Fund program has already piqued a fair amount of interest, according to Posner. Within a week of launching the program on Aug. 19, the fund had received more than 70 inquiries.

Martinez, the first-ever borrower, was quickly followed by a couple other individuals who qualified for a loan. The program also caught the attention of General Treasurer Seth Magaziner, who held a joint press conference with Posner to laud the Capital Good Fund and its efforts in safe-lending practices, calling the program “of vital importance to the economy of our state.”

Posner and his team have partnered with The Hertz Corp. in Johnston, which is selling the vehicles in the rollout of the program. The company, known primarily for its renting services, is making all of the models available for this program newer than 2012 and with fewer than 60,000 miles.

Borrowers who participate in the program for now must purchase their vehicle through Hertz, according to Posner.

“It’s a complicated loan, so we wanted to have one partner,” Posner said. “There was a report put out nationally about how lenders should do this and it suggested doing it this way.”

Martinez’s monthly car payment is less than what she’s paid for Akemi to attend day care and she calculates she could finish her payments in 3 ½ years, despite being given a 60-month loan.

Martinez recently started a new job working for a law firm in East Providence and Akemi is entering kindergarten this month. The mother-daughter duo has decided to name their new car “Lola.”

“We’re transitioning into a better period in our lives,” Martinez said. “We’ve gone through so many steps in our lives. We’ve grown up together and the car is a symbol of the success that we’ve accomplished.” •

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