Borrowers today are educated and technologically savvy. They know what they want, and they want it now! Thanks to technological advancements, financial institutions are often no longer the first stop for consumers with financial needs. The loan market has become increasingly consumer-driven, meaning consumers are looking for the most convenient, least expensive loan offers, wherever those offers can be found.
To address this shift, your lending institution should take measures to attract and retain borrowers before your competitors get to them first.
- Expand Your Borrower Pool
First, determine whether you are targeting a diverse enough set of prospective borrowers for your loan program. You should market your services to people across all stages of life, with your largest gains likely to come from Millennials and Gen Z.
Today’s borrowers have become accustomed to receiving a high level of customer service from the businesses they patronize. You have an opportunity to capture these borrowers by offering a worthwhile, easy-to-maintain solution, which can result in higher portfolio profitability for your institution.
Not all potential borrowers who apply for loans with your financial institution will be perfect candidates for lending. Excellent credit scores, large down payments and interest rates aside, there exists alternative types of borrowers that could be very lucrative for your business. Take the following examples:
- Near-Prime Borrowers: This group wants lines of credit and have money to spend! Near-prime borrowers include many younger lines of credit (namely Millennials and Gen Z) and offer profitable opportunities for your financial institution. Lending to these borrowers at higher interest rates could attract loan yield business from a relatively untapped market.
- Payment-Centric Borrowers: Payment-centric borrowers are more concerned with their monthly loan payments than with their loan’s interest rate. Offering loans with longer terms and lower monthly payments gives you an opportunity to increase revenue through higher interest rates.
Use data to obtain a full view of each consumer’s financial history to be able to expand loan offers, while protecting your portfolio by avoiding borrowers that appear to have a “riskier” history.
- Offer Expanded Lending Solutions
Borrowers are not necessarily using traditional methods in searching for or taking out loans. There are a variety of consumer lending products and add-on solutions that can help differentiate your institution from other lenders to expand your loan portfolio’s profitability. These include:
- Private student loans and student loan refinancing
- Auto and consumer loans with flexible payment structures
- Home refinancing and home improvement loans
Listen to Allied’s Podcast: Leverage Student Lending to Drive Millennial Membership
Implementing these cutting-edge solutions can help you pursue more loan opportunities while offering desirable loan characteristics, like shorter terms and lower monthly payments, to a wider variety of borrowers.
- Deliver Positive Experiences to All Borrowers
In today’s competitive lending environment, consumer loyalty is key. Delivering a positive experience to all your borrowers is one simple way to generate consumer loyalty, and is important to your institution’s long-term success.
Implementing an ongoing digital strategy should be a priority. Borrowers expect financial institutions to offer online and mobile technology for services like bill pay, account and balance inquiries, check cashing, and peer-to-peer payments. They expect this experience to be easy, while still delivering the same level of service they would receive in the branch. Offering digital and mobile tools will help facilitate positive experiences.
At the same time, digital lending can:
- Elevate cross-selling of loans and add-on solutions via the onboarding process with new members and the loan servicing process with existing borrowers.
- Nurture borrower relationships through faster approvals and better offers on both new and existing loans.
Serving new markets, expanding lending options, and enhancing the borrower experience are just some of the actions lenders can take to differentiate themselves. Taking these steps can put your financial institution in a better position to drive consumer loyalty and referrals, and in turn, retain and attract more loan opportunities.
Allied Solutions is invested in helping our credit union clients build competitive loan programs that support the success of their business, members and community.
Click here to contact Allied Solutions about growing your lending program.