For an economy that is supposed to be booming, even locally, we’re continuing to struggle with loan volume with a LTS ratio that is sub 50%. This h...
From Bill Vogeney, chief lending officer and EVP with Ent FCU, and chair of the CUNA Lending Council
There are a lot of factors that could be driving your 50% LTS ratio. Today’s economic recovery is very uneven across the country plus competition for loans is fierce. Here are some questions your credit union can answer to diagnose your lending challenge.
* Does the strategic planning at the board/executive level adequately address lending? The strategic planning process needs to be pushed down to the manager level in order to properly address lending issues. Every two years, my lending managers meet to renew our SWOT analysis (strengths, weaknesses, opportunities threats) that ultimately drives projects.
* Do you understand your business model? Do you generate volume from trying to be the lowest rate in town? (Hint: that’s not a sustainable strategy.) Do you have a strong sales culture that generates volume? Do you rely on “great service?”
* How targeted are your lending tactics? It’s not enough to say “we need to make more car loans.” New or used? Longer terms or shorter terms? If you have an indirect program, what’s your value proposition other than simply “buying paper?”
* Have you adequately addressed “friction points” when it comes to your loan process? How convenient is it to borrow from you? Do you utilize electronic signatures to close loans? Do you leverage credit bureau pre-screening to offer pre-qualified loans?
* Have you tracked your approval ratio and closing ratio? How does it compare to other credit unions in your area? What about the credit distribution of your applicants—are you attracting the right borrowers?
My credit union is having a banner year in lending. Very little of our success is due to things we’ve done this year. Most of our success is due to the planning we’ve done since 2010. If you’re going to grow your loan portfolio, you’ll need to work smarter than ever.
From Bob Schroeder, Vice President, Lending Solutions, Inc., Elgin, Ill.
Why are some credit unions struggling in lending? Is it because CU members are flush with cash and therefore do not have a need for loans? Our experience is there are loan opportunities all around us. Do you have payday lenders, title lenders and drive and pay car lots prospering in your community? Can you not provide a better service than these modern-day pirates?
Lending Solutions Consulting Inc. (LSCI) travels around the country reviewing credit union loan portfolios. We find conservative loan policies are limiting loan opportunities. We also find lenders rushing through their day making loan denial decisions in ten minutes or less. Did we calculate how much revenue we are losing by denying the loan? Did we get the entire story from the member before we turned down the loan? We believe we can structure a loan for 70% of the loan denials we review. The key is finding the member’s motivation and conducting a thorough loan interview that gets the entire story.
If you have not changed your policies and underwriting to meet today’s changing environment it will be difficult for you to succeed. How do you make the needed changes? We recommend you start by reviewing your loan policies and pricing. Change your policies and remove barriers to lending. Review your loans and turndowns. Are you filling orders or providing financial solutions? Your members come up with financial solutions they feel are in their best interest. Your team of well-trained professionals should be able to come up with a better financial solution for your member.