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Auto loans driving credit union growth.

Credit unions are increasingly turning to indirect auto loans to grow and balance their portfolios.  As interest rates are expected to rise, long-term mortgage loans offer interest rate risk, which makes them less attractive as a solution to bolster portfolio performance. Indirect auto loans offer a very attractive alternative to providing portfolio growth due to their short terms and rates, which mirror economic changes.

As credit unions enter the indirect auto loan market, the process involves hiring a team to work with local franchise and independent auto dealers to present the credit union’s loan program and request the dealership to send loan applications to this new entrant to the indirect auto market.  Many credit unions have executed this market entry effectively and are now integral parts of dealers’ consumer finance programs. However, the field of indirect auto lenders has become crowded and new entrants are feeling additional pressure to offer below-market interest rates or purchase low-performing loans to gain dealers’ attention.

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