Motorcycle, RV, and Boat Lending Can Forge the Trail for CU Growth
LAS VEGAS -- With surprising results so far, three promising areas for indirect growth are motorcycles, RV and boats, CU executives at a breakout session at the annual CU Direct Auto Lending Symposium were told.
"Yes, we do have that high 15% net loan growth goal to work toward," declared Anne Nelson, manager of indirect lending at Digital FCU, Marlboro, Mass., in explaining motivation and success in Digital's cycle campaigns.
The CU currently has a whopping 18,000 loans in a $236 million portfolio with the average loan at $12,000. There are 58 loans totaling $309,000 in delinquency and the average balance on good loans is $5,400, said Nelson.
As a comparison, Digital's indirect auto loans in 2007 totaled $275 million based on 20,000 loans with 90% of indirect loans made to new members.
Also participating in the breakout session, titled "Indirect Financing of Non-Automotive Products," was Susan Huss, assistant vice president of financial sales and services for American First CU, La Habra, Calif., who said 2008 is starting off with significant growth.
After just signing on with CUDL at year-end American First had $766,704 in funded indirect RV and boat loans in the first four months with an average balance of $39,000.
But from Jan. 1 to May 31, business has boomed, she said, with the Los Angeles-area CU receiving 295 applications with a value of $17 million.
"Out of these applications, we approved 177 applications for approximately $9.9 million dollars and have funded 81 loans for $4.8 million dollars," said Huss. "We're experiencing a 60% approval ratio with a 46% funding ratio at this time with an average balance of approximately $88,000."
"Credit unions are known for auto loans and yet not all members are aware that we also offer boat and RV loans," she said. "We felt that with the changing economic environment that this product would assist the credit union in achieving our loan goals in addition to increasing interest income."
"Although we are beginning to realize great success with our relationship with CUDL it hasn't come without challenges," Huss added. She noted that "so few credit unions have signed up to participate in the program, dealers are apprehensive to develop a business relationship with CUDL."
The dealers, she explained, want a larger selection of lenders. As of today, there are only five CUs signed up on the program. She told the CUDL session that she was a bit reluctant to share her success story but felt the need was imperative to establish the legitimacy of the CUDL program.
As for Digital CU's cycle loans, Nelson said the Massachusetts CU "does make it easy for members to use indirect or direct financing," noting also Digital is careful about the types of vehicles it lends on.
Eliminated are electric scooters, dirt bikes and race bikes, but it does finance both new and used cycles and basic road cycles produced by branded manufacturers.
Sixty-three percent of its borrowers have FICO scores above 690 and the average loan-to-value ratio is 97.43%, according to Nelson.