How Credit Unions Can Ride the Tide of Increasing Auto Loans

Recent reports from CUNA show new auto loans increasing 1.1 percent in March 2015, and a whopping 22.6 percent year-over-year since March 2014. While other economic indicators have bounced around during the first quarter, these auto loan numbers suggest increased consumer confidence in their own ability to repay on a major purchase.

Credit unions can ride the tide of growing auto loans by integrating Spireon’s LoanPlus CMS into their loan offerings. The program was designed to help members with less than perfect credit finance a vehicle at a reasonable rate while simultaneously protecting the credit union’s (and the greater membership’s) best interests.

More loans, less risk

With LoanPlus CMS, your credit union will be able to have a small electronic device installed on the vehicle that your member is financing. This “Remote Collateral Management Unit” is essentially a GPS tracking device. For recovery efforts, the system not only allows a credit union to locate a vehicle, but an additional option allows it to be remotely disabled.

The overall goal is to allow you to say “yes” to a member auto loan when you would have otherwise said “no.” Some credit unions have balked at the idea of expanding their loan portfolio through non-prime offerings, and it’s an understandable sentiment. After all, one of the cornerstones of the credit union movement is to provide members the best available options, typically through lower fees and better rates. But it’s important to view this from the member’s perspective. That’s exactly what this is – their best available option.

Treating everyone fair

In the financial services industry, it’s not reasonable to expect that everyone will be treated equally, but it is reasonable to expect that everyone be treated fairly. When a member approaches you with a less than ideal credit history, offering the best possible option while helping them rebuild their credit creates a best case scenario.

When denied by their credit union, many borrowers turn to buy here/pay here lenders. The rates that your members accept from a dealer direct program are loaded with acquisition and assignment fees in addition to participation and other hidden charges. Offering an attractive alternative to borderline predatory lending will save your at-risk members hundreds, even thousands, in up-front fees, and thousands in interest over the term of the loan.

This is an excellent option for members who need a fresh start or are just beginning to build their credit. Even when opportunities are limited, it’s still our duty to create a best case scenario for these buyers. Treating our most vulnerable members fairly while mitigating risk to the cooperative can be a precarious balance, but the LoanPlus CMS program can do just that.

Read more about Spireon’s LoanPlus CMS program here, or contact CU Solutions Group to learn more about integrating this collateral management program into your lending strategy!