Are interest rate reductions effective incentives for encouraging timely loan payments?
Filene’s LIFT (Lower Interest For Timeliness) program offered interest rate reductions to borrowers who made timely loan payments. Five credit unions enrolled over 1,000 subprime auto borrowers in the LIFT program, which rewarded every three on-time auto loan payments with an APR reduction of .25%. Filene monitored the impact of this positive incentive on repayment behavior over the course of a year. Through LIFT, Filene also investigated the relationship between lower interest rates, reduced delinquency and customer relationships.
“LIFT” by Filene Research Institute
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