CU Times recently reported that credit unions currently finance one in every four vehicles sold. According to CU Direct Market Research Analyst Jose Torres, new car sales are expected to reach 17.7 million in 2017, a 3.3% increase over last year. As the competition for members' auto and personal loan business rises, credit unions should further evaluate how they measure their consumer lending success. The time when success was measured solely by loan volume growth is over. Now, credit unions should ask: Are loans retained for the life of the loan? Are portfolios strong? And, most importantly, are members financially secure in their loan commitments?
When a loan is originated, it is just that: The origin. This beginning stage sets the tone for the entire loan experience. Credit unions should view the loans they originate in the same manner. They can identify ways to check in with members to determine the impact the loan has on their lives, and assess whether personal or financial circumstances have changed since the loan was originated. This is what modern day members have come to expect from a trusted financial institution partner – something that also plays a role in long-term loan retention. Credit unions should ensure their members understand that if the terms of the loan that once worked now pose a financial challenge, they can and should be having a discussion with a credit union representative to address the issue.
Unexpected expenses and income changes are a part of life. While a loan modification was once viewed as too much of a hassle for most members to consider (and likewise, too resource intensive for credit unions), that is no longer the case. New technology can transform the notoriously daunting process of a loan modification. Now, not only can it be simple and fast, but members are even able to initiate a loan modification online from the privacy of their own home. This level of service helps members when they need it, and can be a considerable selling point for those initially evaluating their options with various competing lenders.
Consider a married couple who shifts from a double to single income after the birth of their first child. It might be valuable for this couple to adjust the terms of their auto loan to increase their monthly cash flow. What if, instead of having to find the time in their busy schedules to visit a branch together and discuss the situation with a credit union employee, they could explore the possibilities online?
Credit unions today can set parameters for existing borrowers, allowing qualified individuals to take control of their financial decisions. Even complex refinance scenarios can be managed this way. Some might immediately think technology cannot be used in their own unique situation or because of certain factors like their gap or credit life insurance. But members might be surprised by the level of sophistication online tools can offer.
Credit unions have an opportunity to offer member support months or even years after a mortgage, auto or personal loan is originated. By making ongoing consumer lending service a priority, credit unions will experience not just growth in origination volume, but stronger loan retention while creating a faster overall loan modification process. As financial institutions race to distinguish themselves with new products and technologies, it is wise to think beyond members' daily transactions, and focus on ways to make their bigger financial decisions easier and more convenient.
It's an excellent time for credit union leaders to give serious thought to online consumer loan modification capabilities. These features are built on the philosophy of self-service, which financial institutions are continually expanding through their web and mobile initiatives. Instead of allowing members to complete only their simple, everyday banking transactions outside the branch, credit unions can make this convenient process apply to consumer lending needs as well.
Michael Ball is vice president of markets and strategy for IMM. he can be reached at 800-836-4750 Ext. 164 or [email protected].
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