Is the Wave of Liquidity a Tsunami on the Horizon?
Ebb and flow, crest and trough, ups and down, cyclical; these are all phrases that come to mind when we look at the state of the auto finance world. Nowadays we see many articles that all talk about strong liquidity in the auto finance sector which translates over time to riskier lending and buying deeper into the credit pool. During these times the banks and finance companies see high originations and low delinquencies.
All is right in the world as the wave surges but over time the wave eventually crashes and originations dip while delinquencies rise. So what is the safest way to ride these cycles?
One precaution that minimizes your risk of going over the falls is having a tried, true and tested collections program. It’s important to ensure the high-risk borrowers are also your high-touch borrowers. Apart from the traditional methods of mailing and calling this population earlier in the delinquency cycle, it is wise to also include borrower contact efforts.
These are volatile times in the economy and the job market. People’s lives are changing rapidly and so goes their abilities and intentions to meet their financial obligations. You’re concerned that the auto loan you extended to them continues to perform month over month. As they get off track a gentle reminder that demonstrates you care but are serious about their commitment may include a field call, or “door knock.”
A “door knock” re-engages a delinquent and silent borrower, one that a collector has been unsuccessful in reaching through traditional methods, through face to face contact at their home or place of employment. The borrower contact representative speaks directly with the borrower to explain that the loan holder may have programs to assist them in keeping their vehicle and getting the loan performing again.continue reading »