What is consultative lending and how can your credit union adopt the mindset?

Credit unions are a trusted financial source for members. They serve as an ally in times of financial stress or hardships and provide the services to help overcome those burdens. During these times, members are likely to share this with their credit union and present what they perceive is the best solution. It can be easy for credit union employees to take members’ problems and requests at face value, continuing with the application process without diving deeper into the crux of the problem they are trying to solve. However, it is the loan officer that has the expertise to direct members to a more applicable solution. They can do this by taking extra time to determine what the member needs and why they need it.

For instance, when a member wants information about a consolidation loan, loan officers’ first reaction may be to simply complete the application without additional conversation to determine the exact need of the loan. With just a little additional dialogue, the loan officer may realize that a home equity loan could be a better option, even offering better terms. This alternative could actually save the member quite a bit of money as home equity loans generally have lower interest rates compared to a higher interest rate with the consolidation loan. Loan officers need to take the time to better understand the member’s financial needs and goals. This will enable them to suggest alternative lending products that would be more beneficial for the borrower.

Why is this important? Because it builds trust and loyalty and provides a superior, holistic member experience (MX) that big banks or fintechs cannot provide. Credit unions must switch to this type of “consultative lending” mindset. This concept encourages staff to think of their individual products as an all-encompassing service, taking the role of a problem solver instead of an order taker.

Three ways to shift to a consultative mindset

The consultative lending approach focuses on loan officers’ ability to understand the institutions’ lending options thoroughly, and their capability to relay it to borrowers in a way that they can understand based on specific needs. Credit unions can put this mindset into action by encouraging their loan officers to ask more probing questions, actively listen and understand what the members’ needs are, and then use this information to prompt available lending options. Here are three ways to set the stage for a consultative mindset:

  1. Know Your Members’ Options

Educate your team on the advisory approach and the options available for your members. Ensuring that staff grasps the entirety of the credit union’s loan portfolio. This involves a thorough review of the requirements and benefits of each loan, and how it coincides with members’ particular circumstances. This education will allow loan officers to feel more confident in advising members. 

  1. Apply Genuine Curiosity to the Conversation

Next, loan officers must be prepared to have more in-depth conversations with members. To gather this information in an unintrusive way, credit union staff need to approach these conversations by illustrating to the borrower that it is for their benefit. They should ensure members that by expanding their reasoning, it helps identify a solution that best fits their needs. Casual questions such as “How are you?” and “How has your day been?” can open the door to further conversation that can enlighten credit union staff to the true problem without being invasive. Ask why they want the loan they are requesting to gain insight.

  1. Stop Order Taking; Listen Actively

In reality, listening may not always be done effectively. Active listening places emphasis on what is being communicated verbally and nonverbally. By paying attention to verbal and nonverbal cues, loan officers are more prepared to understand the entirety of information a member is providing.

Why it matters

At its core, consultative lending is about people helping people. Credit unions can better serve their members by providing them with the financial support they need, as opposed to what they may think they want. This approach to day-to-day lending operations can be made with simple adjustments, and by doing so, transform and elevate the way members perceive lending with their institution.

Ken Dickerson

Ken Dickerson

Ken Dickerson is VP of Sales at LenderClose, a fintech company passionate in providing technology solutions to home equity and real estate lenders. He is responsible for overseeing the rapidly ... Details