In much of the south, public transportation lags behind that of many coastal cities. Even in some parts of Dallas, where 20-year-old nonprofit On the Road Lending is based, it’s not rare for workers without cars to need to rise in the pre-dawn hours, switch several routes, and walk a mile or more — all before tackling their full workday. At times, access to jobs is simply not available without a reliable vehicle.

On the Road Lending provides credit assistance; access to fuel-efficient, reliable cars; and low-interest loans. At least 88% of their clients are considered vulnerable, 80% of loans are made to women, and over half are escaping gender-based violence.

The nonprofit has its own CDFI loan fund, called OTR Fund I, LLC, to serve its clients. The program uses character-based lending instead of credit scores to evaluate risk and provide advising. Everyone who qualifies pays the same 9.75% interest rate. They use U.N. goals like reducing poverty and fuel consumption as their metrics for success.

To date, they have served 6,500 people and currently have 900 loans in their portfolio. Over 90% of clients reduced transportation costs by at least 30% and 81% of vehicle purchases are eco-friendly, reducing greenhouse gas emissions by 30%. Their tech-forward collision repair business, On the Road Garage, opened in 2020.

President Lonnie Smith spoke to us about how they aim to combat predatory lending and provide individuals with an opportunity to build credit.

How does your loan process work?
In the beginning, since many [clients] are transportation challenged, everything takes place online or by phone. Potential clients apply through our website and we require the two most recent bank statements/pdfs, two most recent pay stubs, and ask additional questions. We do a hard pull of credit so we understand overall financial health. We are looking at income and expense flow to see if there’s enough to put towards transportation costs, and looking at it more broadly — not only the car note, but insurance, gas and ownership-related expenses.

How does your CDFI fit into the nonprofit?
Our CDFI lends the money to clients and services those loans and we continue financial mentoring throughout the loan. Clients are referrals from nonprofits and social service agencies like United Way. If someone asks about transportation, 211 refers them to us. We recently started relationships with credit unions where a member may be declined, but we are able to assist, so it is a win-win-win.

The person could potentially pass back to the credit union after we work with them on their credit, and they could get a lower rate through the credit union. That is something we are excited about. I would say the average FICO score of clients is 512. Our clients increase their credit score by an average of 150 points. So the credit cost is below market for them, 40-50% cheaper.

How do you fund the program at its core?
We receive grants and funding support from financial institutions to subsidize our program and offer a significantly lower price. Then for nonprofit partnerships, we use CRM tracking [a software tool called Customer Relationship Management] of clients a particular organization sends. So there is an opportunity to share the collective impact.

So the impact is measurable.
Right. Let’s say they go through a case management program like Catholic Charity or a similar program for some kind of crisis. Once they have gone through that storm, so to speak, they typically need a vehicle to sustain that stability. We are able to be that catalyst for success.

If they have a sub-500 (score) or are new to credit, they might be someone who is formerly incarcerated, may need to re-establish credit, and we can help in the process. So we feel like that is really powerful. It might not be the best business model, but we don’t necessarily want repeat customers. We are serving as a bridge to access prime credit and change behaviors by making people better consumers.

Looking forward, what are your future goals and success metrics?
On average, our clients save $20,000 over the life of the loan — and gain better medical care, quality of life. There is the time element. If taking the bus, it might be three hours one way. So that is a significant cost to family and time, right? And less than 3% of our clients default. In the subprime market that is closer to 30-50%. It is predicated to people failing, ours is to people succeeding — 72% of clients secured better jobs after gaining reliable transportation.

Currently, we are in Alabama, Georgia, Mississippi and Texas, and are working to expand to 6 additional states (Indiana, Arizona, Ohio, Illinois, Tennessee and North Carolina) by the end of this year. So reaching out to state organizations, economic development groups is really important in the marketplace, as well as to get the various approvals needed because we’re kind of a unicorn, not a traditional bank. So we have to explain it. We are like Habitat for Humanity, except for vehicles.

This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is generously supported by Partners for the Common Good. Sign up for PCG’s CapNexus newsletter at capnexus.org.