Lending Perspectives: Making loans and providing sound financial advice aren’t mutually exclusive
Data and knowing your members’ loan ‘stories’ can help you find the right balance.
A top strategic initiative for credit unions is to improve the quality and volume of member financial education they offer. As a movement we can only read so many headlines like “the average American doesn’t have $1,000 in emergency savings” before we decide to get serious about helping members make better financial decisions—and save more.
While we are teaching members to save and make better financial decisions, many of us are also trying to serve more members by making more B-, C- and D-paper loans that carry higher rates of return for our credit unions.
Do these two goals ever clash? They certainly can, and likely will, unless you’re committed to making loans that make sense for both the borrower and the credit union—what I like to think of as “responsible lending.”
I was actively collecting loans at a nationwide consumer finance company every day for the first five years of my career, so I’ve heard all of the excuses why people can’t pay their bills. The root causes are excessive debts and/or the lack of an emergency savings account.
continue reading »
