What is Compassionate Lending?

3 Min. Read

For many, the thought of getting a loan conjures up conflicting feelings. On the one hand, it elicits hope and excitement at the prospect of fulfilling your dream of ownership. On the other hand, it comes with overwhelm and creates a lot of questions.

How do I navigate the loan process? Where do I get started? Will I even qualify for a loan? And if I qualify, will I be able to keep up with the payments?

These questions are common—and for a reason. Traditionally, the lending process isn’t easy. In fact, it’s not designed to be. Federal lending laws and regulations dictate many of the requirements consumers come up against when seeking a loan. These requirements are meant to mitigate risk to lenders, helping them assess creditworthiness and make safer loan decisions. And while that’s important, it sometimes makes getting a loan feel cold and impersonal.

When you look at the big picture, lenders only make up half of the equation. The other half comprises consumers with financial hopes and dreams—to buy a new car, to move into their first home, or to fund another big and important purchase.

Unfortunately, a number of these people have their dreams dashed when they set out on the lending journey. According to Bankrate, 48% of borrowers were denied credit last year. If you’ve applied for a loan and felt like it was difficult and even a little defeating, you’re not alone.

When Process Meets Purpose

Most loan processes haven’t been designed with people and their dreams in mind. Some rules, like federal fair lending laws, are meant to level the playing field and make lending less discriminatory and more inclusive. When it comes to financial inclusion, these rules are a step in the right direction. Still, they may not make the process feel any less intimidating.

That’s why some financial services institutions have started to adopt a different approach: something we like to call “compassionate lending.” It’s where process meets purpose, and new possibilities emerge for borrowers.

Not a law or regulation, compassionate lending is an approach some banks and credit unions have embraced in the spirit of financial inclusion. A compassionate approach to lending rests on the principles of safety, trustworthiness and transparency, collaboration and mutuality, empowerment and choice, and acknowledgment of circumstances that contribute to inequity.

The approach extends to collections, too. When a consumer falls behind on a loan payment, the lender often hands their loan off to a collections department. You might envision “collections” as a group of hard-nosed representatives demanding that you make a payment. And in some cases, you wouldn’t be wrong.

Institutions that pride themselves on taking a compassionate approach to lending and collections will work with you to find the right solution, whether that’s a flexible loan that meets your needs or a payment schedule designed to get you back on track.

Despite the small (but, hopefully, mighty) movement towards lending and collecting with greater care, a loan can’t be guaranteed for everyone, and there will be instances when consumers experience turndowns. While “no” isn’t the answer anyone wants to hear, there is a way to pave a path to “yes.” It’s simply a matter of finding a partner willing to help you get there.

Marine Credit Union: Banking with Care and Compassion

At Marine Credit Union, we believe everyone deserves the opportunity to achieve financial freedom and to feel respected and supported along the way. Compassionate lending recognizes that behind every application is a person with goals, questions, and circumstances that deserve understanding.

No matter your background or where you are on your financial journey, we’ll help you understand your lending options and work with you to find the right path forward.

Experience a different approach with Marine Credit Union. Learn more about applying for a loan or reach out to our team for help.