Toyota Partners With Not-for-Profit to Help Scale Character-Based Lending

Toyota Motor Co., through Toyota Social Innovation, formed a partnership with not-for-profit organization On the Road Lending — by providing three grants totaling over $1 million, the companies announced yesterday.

Dallas-based On the Road Lending, formed in 2013, operates through a character-based lending model to help individuals build financial capability and then provide an affordable loan for a vehicle through its affiliated for-profit lending entity OTR Fund I. The organization then stays with those clients for the life of the loan — usually five or more years — providing financial mentorship and support, according to a company press release.

Through the organization’s partnership with Toyota, On the Road Lending will provide vehicle selection assistance, low-interest auto loans, and long-term financial mentoring to low-income individuals.

People who go through the program are often single parents, domestic violence survivors, veterans, and working families, Ryan Klem, an executive in Toyota Motor North America’s Social Innovation group, told Mobility Finance. But the potentials behind a character-based lending model expand beyond traditional car ownership, he added.

“I think we see the range of services … in terms of vehicles shared, [like] on-demand rides, carpools, or ride-hailing,” he said. “I think it’s a much broader lending practice that could be out there.” This could be achieved by helping scale the innovative lending model, which Toyota’s grants aim to do by assisting On the Road Lending in finding ways to improve processes, build IT infrastructure, and expand services, Klem said.

Currently, On the Road Lending offers an eight-step character-based lending process, Klem said. This can include phone interviews, financial coaching through workshops and going over a credit history, and even a submission of a personal essay. Toyota and On the Road are working together to find ways to automate and streamline the process, in an effort to reduce the time required of individuals in the program, without removing the unique human elements that make the program successful, he said.

There’s other aspects of vehicle ownership that the partnership plans to address sometime down the line, he said, such as the fact that one of the biggest risks for people in a program like this is that even after consumers have paid off a loan, they still have to maintain insurance on the vehicle, which they may have trouble affording. “So how do you build that in as well?” he said.

Toyota will also explore the potential to offer some of its lower-cost, more fuel-efficient vehicles to people in the program, Klem said.

“Maybe the vehicle that isn’t their dream vehicle in the beginning, but it’s reliable, efficient, and safe, and they [can] build up their credit along the way and have proof that they can pay it,” he said. “It really opens the door for them to maybe get more of what they are interested in [next time]. So you kind of get that repeat buyer from that standpoint.”

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