Ever wonder how that credit union on the other side of town continues to be so successful with its indirect lending portfolio and yours is floundering or non-existent? Or maybe you are that other credit union, but you’re looking for ways to get even more out of your indirect operations. If either of these are the case, then you’ll need to start by examining your loan origination system.
Powerful and rapid decisioning functionality coupled with streamlined processing and user-friendly interfaces can make a world of difference when a credit union is looking for an edge to outperform competitors in the indirect lending space.
Here are three of the most important considerations for any credit union trying to size up whether a loan origination solution (LOS) is the right fit for its indirect lending needs.
Does your LOS support robust auto-decisioning?
In the indirect lending space, it’s imperative that you’re able to return decisions as quickly as possible. Every second that goes by is an opportunity for a competitor to step in and capture business you both want. Your LOS must be able to auto-decision and do it well. This means that credit policy adherence and risk-based pricing should allow a large percentage of your decisions to be returned to a dealer in seconds. This allows for the management of higher volumes, improves customer satisfaction, and more importantly provides inherent governance in your decisions.
Does your LOS connect to dealer portals such as Dealertrack and RouteOne?
If auto-decisioning improves decision turnaround time but the creation of the applications and communications to the dealer are all manual, then your overall turnaround time suffers. Abbreviating that process is a key to success, and the use of established dealer portals like Dealertrack and RouteOne is a must. Your LOS should have well-established interfaces to these providers for application imports/updates, decision and analyst communications, and status tracking. This not only shortens your decision time but allows for quicker funding. Dealers send more deals your way if they know they can depend on you to decision and pay quickly.
Can your LOS provide unique pricing for each participating dealer?
Pricing strategy needs to be part of your automated indirect lending process. The system should be able to handle risk-based pricing scenarios for the assignment of buy/contract rates, but to do that at a product level alone is not flexible enough. Each dealer needs to be able to have unique pricing, if required. While pricing may be uniform across your dealerships, having the ability to reward better partners with better rates needs to be an option. Additionally, and perhaps most importantly, you should evaluate how the system is able to use multiple factors to assign rates. This might include credit scores, LTV, DTI, vehicle mileage, and vehicle age, among others.
Hopefully these three examples will help your credit union evaluate the indirect lending capabilities of either the current LOS being used or any other solutions you’re considering to take your operations to the next level. The CRIF ACTion loan origination system offers superior indirect lending functionality including access to RouteOne, Dealertrack, and other major portals, as well as the ability to provide unique pricing for each participating dealer.
For a complete checklist of the top considerations any credit union needs to factor into its evaluation of how an LOS fits its indirect lending operations and goals, please click to button below to download our The Right Loan Origination System for You Top 10 Checklist: Indirect Lending.