INDIAN WELLS, Calif. — Credit unions wanting to elevate their lending programs should differentiate themselves by being innovative beyond product offerings, said Judy Tharp, vice president, Lending Solution Development for CUNA Mutual Group. Tharp addressed credit union leaders during CUNA Lending Council's annual conference.
Tharp said that credit unions should move more toward selling the experience rather than just the product including being at the point-of-sale, lending deeper beyond the best credit scores and completing transactions quickly through use of technologies such as online decisioning.
Vehicle lending is a prime target for selling the experience, and traditional auto lending has been direct lending, but currently 96% of credit union loan growth comes from indirect lending and 70% of member growth is coming in through indirect lending, Tharp said. Credit unions should work to create a total auto-buying experience for their members.
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"Don't think it's out of your hands because the lending is done at the dealer," Tharp said. "Have the latest E-contracting automation, make processing available 24/7, and establish dealer relationships."
Near-prime lending has the biggest upside, Tharp said. She cited recent research that indicates 42% of the population has a credit score under 700, which is generally considered the cutoff for prime lending. Twenty-eight percent fall into the near-prime category. Prime borrowers typically don't generate as much return and sub-prime borrowers may be too risky, but Tharp said near-prime borrowers are a "sweet spot" of profitability if credit unions follow best practices.
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