Some credit unions have special programs for low-income and low-score borrowers and provide 100% or even 110% LTV loans. These programs come with their own special requirements that borrowers must complete â typically some form of financial education. Credit unions that donât have the resources for this kind of intense hands-on pro- gram or the appetite for the risk a high LTV loan to a nonprime borrower creates, should consider a lower LTV arrangement.
The higher the risk, the lower the LTV. The maximum LTVs recommended in SW Corpâs Loan Guidelines are as follows:?
â¢ C credit (FICO scores between 620 and 659): 95% LTV?
â¢ D credit (FICO scores between 580 and 619): 90% LTV ?
â¢ E credit (FICO scores between 540 and 579): 80% LTV ?
â¢ Below 540 FICO scores: 75% LTV
These are recommended maximums, but a credit unionâs lack of appetite for risk may make its LTV decisions more conservative than these.
Some credit unions will only lend up to the loan value of the vehicle for nonprime loans and feel the cushion gives them relative protection in the event of repossession.
But remember, a bad loan is a bad loan, regardless of LTV! Repossessions incur a lot of additional expenses to a credit union and there is no guarantee the credit union is ?going to get even the loan value back in a sale of the vehicle.