What is a step credit unions can take to help reduce bankruptcy loss?

Refinancing or consolidating loans is a proactive measure that credit unions can take to help members manage their debt more effectively, which in turn reduces the risk of bankruptcy. By allowing members to consolidate multiple loans into a single, more manageable payment, credit unions can help lower the total monthly payment amount. This can alleviate financial strain on members, enabling them to keep up with their payments and avoid the possibility of defaulting on loans.

Additionally, when members have a clearer repayment path and simplified access to their debt, the chances of them falling into unmanageable financial situations diminish. By providing options like refinancing, credit unions show a commitment to supporting their members’ financial health, which can lead to more successful outcomes and reduce overall bankruptcy loss for the institution.

The other options, while they may seem beneficial at first glance, do not effectively address the underlying financial issues that can lead to bankruptcy. Encouraging more debt or increasing loan payments could exacerbate existing financial difficulties, while charging higher interest rates would place additional burdens on members, potentially leading to a higher likelihood of bankruptcy.