For many credit unions, indirect auto lending remains both a growth driver and a persistent challenge. While these loans can help credit unions expand their portfolios and reach new audiences, they often come with a hidden cost: low member engagement and higher delinquency rates.
Indirect borrowers don’t consciously choose their credit union. They’re introduced through a dealership when the dealer presents their best loan option, so the credit union becomes just a name on the paperwork—often one they don’t recognize for weeks. Because the first payment is usually made at the dealership, it can take weeks before the borrower even realizes who their lender is. The emotional connection is to the car and not the lender.
What should be the start of a member relationship becomes a simple transaction—setting up payments and managing a balance. These “members” were never truly onboarded, so there’s no sense of belonging. Without that connection, they’re less likely to engage, more likely to miss payments, and far less likely to grow their relationship beyond the loan.
The opportunity: From lender to partner
When a credit union acquires an indirect auto member, the first communication with that borrower shouldn’t be a bill—it should be a welcome. Imagine a proactive onboarding process: a personalized message introducing the credit union, its mission, and the benefits of membership. A short video or email explaining how to make payments, access member services, and use digital tools could go a long way toward building trust.
Credit unions can also use this moment to highlight their differences—community focus, lower fees, and personalized support. Even small gestures, such as a “welcome to the credit union family” email, can humanize the relationship and set the tone for future engagement.
Furthermore, an optimized payment experience puts members first and embraces digital convenience. Here’s what that looks like:
- Start with smart digital reminders: Members shouldn’t have to track due dates or call for payment details. Automated reminders keep them informed and on schedule.
- Make payments effortless: A clean, modern interface should enable payments in just a few clicks—online or on mobile—with secure, personalized account access that eliminates the need for logins.
- Offer flexible payment methods: Members should be able to pay using their preferred method—ACH, or digital wallets like PayPal, Venmo, Apple Pay, or Cash App Pay—along with the branch.
- Add flexibility to autopay: Give members control with options to choose their payment date, split payments throughout the month, or adjust amounts—making it easier to stay on track and avoid missed payments.
Digital engagement tools can further bridge the gap. Simple payment reminders, hardship options, and financial wellness resources can turn a faceless lending experience into an ongoing relationship. By reaching borrowers through text, email, or mobile notifications, credit unions can maintain consistent contact and reduce delinquency risk.
Some fintech partners are already helping credit unions modernize this process—automating payment reminders, providing hardship assistance, and even connecting borrowers to financial literacy tools that strengthen their financial health. For example, some partners offer automated payment support, a credit builder program, and personal financial management tools that help members build credit while staying on track with their payments. These kinds of partnerships allow credit unions to scale engagement without overburdening staff, while ensuring borrowers feel supported beyond the loan.
The relationship mindset
Ultimately, the path to loyalty starts with mindset. Indirect auto borrowers shouldn’t be viewed as a temporary addition to the loan portfolio—they’re potential long-term members who simply need a proper introduction.
By combining thoughtful onboarding with modern digital communication, credit unions can transform indirect lending from a transactional channel into a relationship-building one. The result isn’t just fewer delinquencies—it’s stronger, more loyal members who see their credit union as a partner in their financial journey.
Indirect lending may begin at the dealership, but loyalty begins with the credit union!
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