Just a few short years ago, a “take-back” was a term kids used when playing games with their friends. Now it’s an important part of the Kasasa Loan®, offering a whole new way to approach getting out of debt. Take-Backs allow borrowers to pay ahead to reduce debt, but access that extra again if they need it. That means there’s less risk when getting out of debt, making the Kasasa Loan the most consumer-friendly loan available on the market today. And the data shows that this functionality is actually a feature people need — and are using!
The COVID-19 pandemic has taken a major financial toll on every aspect of the economy, and borrowers are feeling that pain. That’s where Take-Backs are coming in handy. The Kasasa Loan experienced a 288% increase in consumers leveraging their Take-Back funds in the first quarter of 2020 compared to the first three months of 2019*. The average amount consumers withdrew was $442.
The Kasasa Loan’s Take-Back balance gives borrowers another option.
It makes sense that borrowers who had paid ahead on their loan might need that money back in the face of these new financial challenges. But even prior to the pandemic, borrowers were using Take-Backs, because being able to access those funds is a viable way to get through an unexpected hardship.
Obviously, that need can vary depending on the economic climate and consumers’ financial situations. While April proved to be quiet for Take-Backs, May saw some consumers withdrawing more from their Take-Back balances to cover needs, while many others were able to pay ahead and prepare for the future. This shows that no matter the situation, borrowers see the value of getting ahead on their loan.
These numbers bode well for community financial institutions as a whole too. Of course Kasasa Loans saw an uptick in delinquencies for some select borrowers, but compared to industry data on traditional loans, they're performing at near-normal levels. What this tells us is that borrowers are creating financial cushions and using them to stabilize their finances when things get tough. This reduces the burden on the lending institution already dealing with branch closures, reduced hours, and the pain of collecting during a pandemic.
A unique feature available for a unique financial situation.
With an unprecedented level of unemployment claims and the Congressional Budget Office estimating that the unemployment rate will average 15% in Q2 and Q3, many people need funds to get them through to their next paycheck.
If not for the availability of the Take-Back balance, borrowers would be limited to increasing their balances on credit cards, seeking additional loan funds, or falling into a delinquent state. Instead, consumers can click into their Kasasa app and use the interactive dashboard to see at a glance how they’re doing on their payback schedule, change their monthly loan payment, and access their Take-Back balance with no increase to interest rate or additional cost to them.
A way to get out of debt faster…and a safety net when it’s needed.
Of course, it’s nothing new for community banks and credit unions to respond to account holders’ needs and help their communities. It was community institutions that led America out of the last economic crisis by restarting lending. Now they have an opportunity to do it again; they can help consumers prepare for whatever the future holds by offering a loan that gives them control of their debt in a safe and effective way.
This can mean a lot to a consumer and positively affect the way they view the financial institution that gave them that loan. That $442 isn’t substantial enough to jeopardize an institution’s finances, but it roughly equates to a car payment — which can make a world of difference for someone who is trying to make it to the next paycheck.
Our partner financial institutions that offer the Kasasa Loan with Take-Backs have reported a high level of loyalty among consumers. Whether they are new or existing account holders, 93% of Kasasa Loan borrowers also have a checking account with that community bank or credit union.*
The numbers do support the idea that borrowers are finding value in being able to get ahead on debt and still access those overpayments should they need them. Typically, institutions offering the Kasasa Loan see an average of 50% of borrowers build up their Take-Back balance* and then access those funds when needed. Today, amid the COVID-19 pandemic, the number of people who keep extra money in their Kasasa Loan reserve has dropped to near 40% as borrowers tap into their safety net.*
This unique loan provides community financial institutions a new way to differentiate themselves from the competition in a time when deposits are coming in faster and they need to even out their balance sheet. Kasasa Loans offer a way to compete on something other than just rates.
In a time when consumer use of lines of credit is predicted to increase and bankers will need to seek additional paths to non-interest income without operational expense or exposure risk, this data story we’re witnessing among borrowers demonstrates exactly what Kasasa stands for. Community financial institutions are the best sources for people-friendly lending and financial products.
*All stats: Kasasa analytics