With the right marketing and service tactics, credit unions can improve retention, deepen member relationships and build their indirect portfolios.
Sponsored by SWBC
In today’s lending landscape, indirect loans are a large part of many credit union portfolios. According to Callahan and Associates, indirect loan balances have nearly doubled for credit unions over the past four years. While indirect loans are typically a win-win for both borrowers and credit unions hoping to expand their business, it also creates a unique set of challenges when it comes to managing delinquencies.
Some lenders view indirect loans as short-term transactions that don’t necessarily have the potential to develop into a full-blown banking relationship; however, with the right marketing and customer service tactics, credit unions do have the ability to improve retention, deepen member relationships and build their indirect portfolio into a long-term growth opportunity.
That said, to build thriving relationships with your indirect borrowers, it’s important that your credit union manage potential delinquencies that can accompany borrowers that don’t have a strong banking relationship with your credit union.
Here are three strategies your credit union can deploy to help manage delinquencies with your indirect borrowers:
1. Offer Convenient Payment Methods
In most cases, indirect borrowers have their checking and savings accounts at other financial institutions, so they most likely cannot or do not use your online banking and/or bill-pay solution. To help your indirect borrowers avoid delinquency, offer them multiple payment options that they can conveniently access 24/7. Borrowers are less likely to experience delinquencies when they have access to a convenient payment platform.
Likewise, offering convenient payment methods allows your collections team to focus on borrowers that are experiencing real delinquency issues and are in need of creative and mutually beneficial solutions.
2. Offer Financial Literacy Resources
More and more, credit unions have accepted and embraced their role as financial educators. Beyond providing checking accounts, credit cards and lending products, your members look to you to provide financial resources to educate and set them up for success.
With the proper educational resources and direction, an indirect borrower who is behind on their loan payment today could easily become a member in good standing tomorrow. By providing an accessible library of resources on your website, you can help your members make wise budgeting and debt management decisions—foundational information that can help them avoid delinquency issues.
3. Communicate With Them via Multiple Channels
One of the leading ways to help your borrowers avoid delinquency is to have multiple avenues of communication.
Different people prefer communicating through different channels. As technology creates more contact options, it’s important to keep pace with borrower preferences. By providing borrowers with automated messages via phone calls, text messages, and/or emails alerting them early and often of when their loan payment is due, you can help a good portion of your borrowers avoid falling into delinquency simply by staying top of mind. Regular touchpoints with your indirect borrowers can not only help them avoid delinquency, but it could also deepen the relationship and turn them into active members.
Jeff Mortenson is VP/client relations for AutoPilot® services at CUES Supplier member SWBC, San Antonio, Texas. Have you evaluated your collections operation lately? Download our comparison guide and find out if you could benefit from outsourcing some or all of your collections work to SWBC!