LENDING
QUESTIONS AND ANSWERS

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Creditor and Debtor:

   The Creditor is the membership(this includes the Debtor) of the credit union as a whole, where the Debtor is the individual needing extra money to meet other obligations or to make a major purchase.

Evaluating Risk:

   All lending is basically an evaluation of risk of the Debtor to return the original funds to the Creditor. There are five main risk factors in evaluating risk of a Debtor:

Capacity - ability to repay loan based on income and work history.

Credit - confidence in the Debtor's ability or intention to fulfill their obligation.

Capital - the Debtor's wealth, the Debt-to-Income ratio helps us to determine.

Collateral - the security that the obligation will be repaid.

Character - the Debtor's credit history

All five of the factors combine to determine the risk of loss to the credit union membership. Collateral is not always of a physical nature, in the case of "unsecured" or "personal loans", the secured interest is the promise of the Debtor to repay the debt. In such loans the Debtor has given there word or personal assurance to fully repay the debt. The Creditor is concerned with the ethical traits of the Debtor. This is determined by the response of the Debtor concerning past debt with both the credit union and other Creditors.

The Process:

   The lending process starts with completing the application and other forms for the type of loan requesting. The credit union staff receives and processes the package , ensuring that all paperwork is properly completed and documentation is attached. The package is forwarded to a Loan Officer for underwriting, evaluation of risk, who approves or disapproves the loan. All loans are reviewed by the Credit Committee, but any disapproved loan is automatically sent to the committee for review.

Appeals:

   The difference of a Credit Union from other lending institutions is that all members (Debtors and Creditors) are a part of the finanicial institution. Thus, if the Loan Officer disapproves a loan and the Credit Committee concurs with the disapproval the Debtor has the right to appeal to the Board of Directors (BOD) for review.