2015 was a strong year for credit union lending. But beyond originating and servicing loans, credit unions are succeeding by reducing friction and increasing satisfaction in the overall loan process.
This is especially true compared to online lenders. As reported in a recent American Banker article, a survey of more than 3,400 small businesses by the seven Federal Reserve Banks, found that though more small business loan applicants are being approved by online lenders, few of them are satisfied with the experience. The survey found that online lenders approved 71% of applicants for at least some credit, but the satisfaction rate was just 15%, versus 51% for large banks and 75% for small banks.
The main reasons for dissatisfaction with online lenders among successful applicants were higher interest rates and unfavorable repayment terms, according to the survey.
This week, CreditUnions.com profiles a number of credit unions that are making lending more convenient and satisfying for members.
Buying a car process can be an arduous, time-consuming task for members. For credit unions, the process includes many touch points during which they can lose member financing, especially when members shop at dealerships that have tenuous relationship with the cooperative.
To retain more point-of-sale business, credit unions pre-approve members and provide them with a physical check to present at the auto dealership. The auto drafts give members more confidence in the buying process, keep them on a predetermined budget, and reduce the likelihood they take out financing elsewhere.
In "3 Ways To Offer Auto Draft Pre-Approvals," by Callahan Associate Editor Erik Payne, State Employees’, Digital Credit Union, and Suncoast Credit Union share what makes their auto draft programs successful.
In this week's Graphic Of The Week, "Lending Highlights From Third Quarter 2015," Callahan Industry Analyst Stephanie Clark identifies successes in the credit union loan portfolio.
In 2005, BECU turned a longstanding credit model on its head.
Typically, if a consumer wants to reduce the rate on a loan, they have one of two options. First, they must demonstrate they can make consistent, on-time payments and then specifically ask their financial institution for that reduction. Second, they can refinance with another institution.
However, when a consumer’s credit starts slipping, a financial institution can raise the interest rate on their consumer credit products automatically. That fact was a call to action for the fourth-largest credit union in the nation, and BECU responded by implementing the opposite program., repricing $100 million in loans in 2015. To see how, read "A Strategy To Reward Members For Positive Behavior" by Callahan contributor Dahna Chandler.
By many measures, 2015 was a landmark year for credit union lending. According to quarterly performance data reported by Callahan & Associates, first mortgage originations surged by 33.8% year-over-year, enabling credit unions to capture a record 8.5% market share. Consumer lending also grew, with new auto loans pacing the category at 16.8% growth. Credit unions ended the year at an average loan to share of 77.5%, the highest level since 2009.
With all of this positive momentum, it is worth considering how top credit unions are able to grow their loan portfolio while handling the increase in volume efficiently and safely.
Digital Federal Credit Union, popularly known as DCU has implemented several mortgage and consumer lending programs in recent years that have helped it to attain strong year-over-year loan growth of 8.77% in 2015, while maintaining a robust loan-to-share ratio of 103.62%. To learn more about this growth, read "How To Make Lending Easy For Members" by Callahan contributor Ted Goldwyn.
Community Financial Credit Union has learned a thing or two in 15 years of automatic loan decisioning. That includes treating it as a work in progress.
“We tweak the tables whenever we feel we might be able to open them up more or close them down some,” says Jill Johnson, chief lending officer at the suburban Detroit credit union.
She says the credit union automatically approves approximately 25% of its consumer loans — including direct and indirect auto, personal, Visa, and some equity lines — but would like to boost its auto-decisioning rate to 35% to 40% overall.
In "Tips To Make Better Automatic Loan Decisions," Callahan Senior Writer Marc Rapport shares how two credit unions get to "yes" on loan applications, regardless of who makes the call.