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!

Developing a Private Student Lending Program that Lasts at Your Credit Union

 

by Amy Dolk, Credit Union Student Choice

Over the past several years, hundreds of credit unions have entered the private student lending market. By focusing on several important pillars, these credit unions are delivering a valuable solution to borrowers while also returning positive results to their bottom line.
 
It may seem daunting to dip your toes into the student lending pool, but the basics are the same as most other lending initiatives. Focus on your members and their individual needs so you can point students and their families in the right direction toward paying for college. Here are the key pieces to focus on as you begin (or expand) your private student loan business.

• Education: A college degree comes with significant benefits, but students and families need to understand how to responsibly pay for a college education. Prospective borrowers should be educated on the importance of finding “free money” (grants and scholarships) and low cost funding options before applying for private loans.Of course, it’s also important to show families why YOUR private student loan is a smart choice. Focus on the credit union philosophy of putting people before profits, and emphasize details like flexible repayment terms and payment options. It’s not about bad-mouthing “the other guy” – it’s about showing members they can trust you with their future.
  
• Certification: School certification engages the college financial aid office for verification of enrollment and validation of the loan amount. This ensures the loan amount is not more than the cost of attendance and is disbursed directly to the school. It also allows financial aid officials to counsel the family on available options for reducing costs and utilizing lower-cost alternatives before relying on private student loans.
  
• Underwriting: It is vital to use underwriting criteria that factors in credit score and history, encourages the use of a co-borrower, and takes into account the type of school. These items have a major impact on repayment. Data from several of the largest private student lenders in America show that private loans with a focus on these items perform better than federal programs, and result in fewer delinquencies and charge offs.
  
• Repayment: Offering longer repayment periods and graduated repayment options helps support recent graduates who might be underemployed for a period of time. Young adults can easily be overwhelmed by entering the workforce and paying bills. If a student loan payment is unmanageable and borrowers don’t understand the consequences of default, it can be all too appealing for them to simply stop making payments.
  
• Relationships: Lending to students and families within your existing footprint leads to a genuine opportunity for long-term relationships and a younger membership. You know your communities and their residents; listen to their needs. Remember word of mouth is always crucial to building business. When you are able to help members and their families through a major life change, you’re building a valued relationship that will be shared with those around them.

By focusing on these pillars, you can build a strong student loan program with a positive reputation. Learn more about how you can offer private student loan options to your membership!

Six Ways to Boost Auto Loans at Your Credit Union

 by Amy Neale

As you might have read in last week’s blog, credit union loan growth is on the rise. In fact, over the past nine consecutive quarters, new auto loans have grown 10.7% and used auto loans are up 9.3%. Whether or not your credit union has experienced similar growth, there are still ways to boost auto loans:

1. Work with an indirect lending company like Credit Union Direct Lending.
2. Cultivate connections with auto research sites such as AutoSMART.
3. Target market to the 35-65 age demographic, especially those with incomes that range from $40K to $75K. The recent Credit Union Satisfaction Index (CUSI) from CFI Group showed this demographic was greatly interested in seeking auto loans from their credit union.
4. Offer incentives to members when they acquire new or used auto financing. Incentives like discounted or free auto club memberships can go a long way.
5. Join a membership enhancements program like Invest in America’s Credit Union Member Discount from GM which offers instant auto loan leads when your members get a GM discount authorization code.
6.  Make sure your frontline and lending staff are well trained and kept up to date on your latest auto loan promotions and rates and that your team has the skills to accomplish the loan volume your credit union needs. CUNA Mutual Group’s Lender Development program can help with this. 

Whichever way your credit union chooses to boost auto loan volume, the key is to be as proactive as possible. We’d love to hear other ways you have grown auto loans your credit union. Leave us a comment and let us know!