What Drives Member Loan Decisions

Recently, research has shown that several economic indicators are tilting in the credit union industry’s favor – most of which revolve around lending. Which means now is the time to evaluate these indicators, reassess what drives a member’s loan decisions and what your credit union can do to keep this forward momentum going.

The Good News

Consumer behavior is giving every indication that our country is slowly climbing out of the recession.

·         Equifax Inc. reports that new credit for auto, credit card, consumer finance and home equity revolving lines have risen from $145 billion to $167 billion in the past year.

·         Data from Standard & Poor’s shows the first month-over-month increase in U.S. home prices in eight months.

·         $87 million in new auto loans were made during the first quarter of 2011. According to Equifax , this was a 21 percent increase from 2010.

·         Average auto loan amounts for prime borrowers are now about equal or slightly more than pre-recession levels, states Equifax.

·         Equifax also reported that the average U.S. credit score rose to 696 in May, the highest in at least four years.

What it Means

Your members are getting more in the mood to borrow money and purchase big ticket items like homes and cars. But it’s not enough to know that they’re more inclined to shop, with steep competition for loan business, your credit union needs to fully understand how they shop, why they borrow and from whom.

A study by the Mortgage Bankers Association indicates that the majority of home buyers contact three or more lenders with 50 percent of buyers financing their loans through the first lending source they reach out to. Also, borrowers claim to be more influenced by their friends and family than any other source – which makes a solid case for building a referral program at your credit union. Who would know better than family and friends if someone is in the market for a new car or home?

Nearly 20 percent of borrowers were contacted by a lending provider before the loan search process, either mainly by phone (about 50 percent) or letter (about 30 percent) – strong evidence that telemarketing and direct mail do reach borrowers. 80 percent of respondents cited interest rates as a main concern (they didn't say APR or annual percentage rate), while 23 percent mentioned fees.

Now What?

Now you have all of these thought provoking statistics under your belt, what do you do with them? Become the first point of contact for your members when they’re shopping for auto loans, mortgages and credit cards. A credit union’s ability to grow their loan volume depends greatly on how it enhances member loyalty and retains loans. Be there for your member through the entire lending process.

If they’re looking to buy a car, offer them used or new car valuations; have online auto search capabilities so they’ll already be on your website when they find their dream car; and have strong relationships with local dealers so shoppers will get referred back to you. If they’re homebuyers, have loan calculators on your website as well as prominently placed mortgage rates; and offer easy access to mortgage lenders to build that relationship from day one.

Whether they’re buying homes, vehicles or just a new pair of shoes, your members are not only going online, but they’re also going mobile to do their research. 38 percent of U.S. shoppers use their mobile devices during the shopping process before purchasing. Does your credit union have a mobile site or app to meet that demand? And for those consumers who use the Internet for their research, having online applications and loan decisioning, calculators and valuable articles on your website should keep them coming back.