Blended Rate Lending

A collateral loan and an unsecured loan blended together with one weighted rate.

When a borrower wants to borrow more than they qualify for against collateral, sometimes a blended rate loan is the answer.

If John qualifies for 100%* of the value of the vehicle he wants to purchase, but he needs 115% to purchase it, we can do the extra 15% as signature and blend the auto and signature rates together:

*The collateral portion of the loan should include any backend products, just like

a normal collateral loan would. The remaining amount over the qualified collateral

value plus backend adds would be the signature amount.

$11,500 = Purchase Price

$10,000 = 100% Value - Collateral Portion = 5% Interest rate

$ 1,500 = Difference - Signature Portion = 15% Interest rate

((Col Portion / Total Loan) * Col Rate) + ((Sig Portion / Total Loan) * Sig Rate) = Blended Rate

(( 10,000 / 11,500 ) * .05 ) + (( 1,500 / 11,500 ) * .15 ) = 6.3%

Thankfully, you don't have to do the math yourself. There is an Excel spreadsheet available to do it for you, through the Blended Rate Calculator button on this page!

The signature rate should match the rate for the term of the loan. For loan terms 36 months and longer, use the 36-month term rate.

The signature portion of the loan should not exceed 20% of the loan, $5,000 maximum or the amount of signature for which the member qualifies. If the member has a FICO below 625 and only qualifies for $1,000 signature, the signature portion of the loan should not exceed 20% of the loan or $1,000.

Any of the member's current unsecured loans should be included in figuring the available unsecured limit for the new loan. If the member has used any of their unsecured limit on other loans, then it cannot be more than their available unsecured limit.

Future signature advances would also be affected by this use of this signature amount.

Re-evaluation of the JD Power (NADA) value would be needed to release or decrease available any of the signature limit for other uses.

The rate will remain consistent until payoff occurs.

The loan description should identify the blended rate so the signature portion can be tracked. Example: 2010 Ford Edge – BR

A note should be put in the Notes section on the loan in Member Services stating that it's a Blended Rate and breaking out the auto portion and the signature portion of the loan.

Rate adjustments will need to be applied to both the collateral and the signature rates as qualified:

ADD 2% for Thin Files - credit reports with less than 18 months of history on at least 3 tradelines (not including any student loans or derogatory!)

ADD 2% for Recent Bankruptcy - Bankruptcy within previous 3 years (needs Loan Review)

(Collateral Portion Only) ADD 2% for 20+ years - Collateral older 20 years

SUBTRACT .25% for High Credit - Credit scores 780 or higher

(Collateral Portion Only) SUBTRACT .25% for Equity Discount - LTV of 90% or less

(Collateral Portion Only) SUBTRACT 1% for I Have Connections - Connections CU member with a checking account and direct deposit.