1 / 11

High Rate Lending

High Rate Lending. Why Offer Benefits How to Implement GPS Lending to Higher Risk Members Monitoring the Risk. Why Offer. Some members with sub 640 credit scores are very safe to loan to

dallon
Download Presentation

High Rate Lending

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. High Rate Lending • Why Offer • Benefits • How to Implement • GPS Lending to Higher Risk Members • Monitoring the Risk

  2. Why Offer • Some members with sub 640 credit scores are very safe to loan to • Those with low beacon due to medical judgment, an older missed payment, fraud, being new to the workforce, younger, lack of recent activity • Many times these lower score members are safer than members with 600-660 beacon scores who previously were 740+

  3. Benefits • More loan interest = more profits • An 18% loan to a person with a 613 credit score provides 6x the loan revenue as a 3% loan to an A+ member • More Profits = • Higher dividends, salaries, marketing budget • More services, products, resources • All these lead back to increased LOAN growth • These loans will always be above CD rates • Strengthens Member Relationships – More loans in the future to same members as you’ve helped when no one else would • Helps fulfill the Credit Union industry mission of serving the underserved

  4. GPS Lending to Higher Risk Members • Culture • Pricing/Incentives • Marketing • Creativity • Continuous Monitoring

  5. How to Implement cont. • Culture • Loan departments realize they need C, D, & E borrowers to increase net interest margin • A credit score ≠ persons worth • Understand you have to closely look at the reasons for the lower score such as time at job, amount of trade lines, and timing of any negative information • Determine the right term and the right amount • Minimize the downside (loan to value, direct deposit, etc)

  6. How to Implement cont. • Pricing/Incentives • Align reward and risk • Align the interest rate the Credit Union receives with the amount of risk it is taking by loaning to certain credit tiers • D & E credit tiers typically fall within a 15 – 18% rate to offset risk exposure the Credit Union is taking on • If using indirect, consider paying a higher dealer incentive for B & C loans than A & A+

  7. How to Implement cont. • Marketing • Similar to younger adults who use non-traditional media • Local sale papers (Penny Saver, Apartment Guides, etc) • Radio • Social Media such as Facebook, Twitter, or your CU Website • Word of mouth – people tend to spend time with like minded persons • Used Auto Dealers will push these people to you since they can’t get them financed elsewhere

  8. How to Implement cont. • Creativity • Rate Reduction – May consider a rate reduction for each year or six months the member has 0 late payments • Incorporate with a Credit Builder Program • Helps in selling Credit Union Repos faster as most purchasers don’t have the best credit

  9. How to Implement cont. • Continuous Monitoring • GPS Tracking and starter disabling devices • 60+ day delinquency report comparing it to prior month, quarter, and year looking at trends • Always working a 10 – 60 day delinquency report • Slice up info based on credit tier and product to look at charge off percentage and delinquency per dealer for indirect lending • Monitoring loan revenue by credit tier (gross and net after charge offs)

  10. Q & A

More Related