How to break out of a loan rut
Deposits may be hot right now, but loans are still the primary income generators, not to mention membership and asset grow-ers, for credit unions. Plus, loans are a chance to be a part of your members’ significant life events. So loans are still worth talking about.
Unfortunately, credit unions have mostly been marketing the same loans for decades, long enough to get into a rut. Auto loans have been the go-to all those years, because the risk is relatively low, they’re paid off in a few years, and before long the member is ready for their next vehicle. Mortgages mean bigger loan amounts, and put you first in line for home equities and HELOCs later on.
But today’s loan picture isn’t what it used to be.
Home prices have soared, making it even harder for some people to buy (assuming they can even find one for sale.) And, as interest rates have gone up, home sales numbers have tanked, dramatically lowering the number of mortgages financed. Autos cost a whole lot more now, so terms have lengthened to make monthly payments work for more people. Even so, roughly 17% of new car buyers are paying more than $1,000/month – which limits the number of members who can afford that monthly payment.
While car loans and home loans won’t be going away anytime soon, and those marketing campaigns can be a lot of fun, CUs probably need to rethink which loan products they offer to break out of the loan rut.
Ask your members what they really want and need.
Put your traditional loan campaigns to the side while you do some research. Ask your members what their problems are, both big and small. Ask what they really want and need, what would really help. Once you get their input, you can start getting creative.
It may take some out-of-the-box thinking, and the loan amounts may be smaller, but if you’re reliably there for the smaller stuff, you’ll still be first in line when they’re ready for a home or a new pickup.
Plus, with new tech and reasonable efficiencies in underwriting, you can sustainably make shorter-term loans for smaller amounts, generate the margins needed, and make more of those “smaller” dreams come true.
But first, you’ll need to listen. And be ready…
When your members just need some $$ to get by
Unexpected expenses always seem to have bad timing, so your members may need a small-dollar loan right away. Make sure they don’t go to a payday lender instead of your credit union.
If you aren’t set up to handle quick small-dollar loans, there are companies like Quilo and Zest.ai that are. Even better, check out QCash. Not only are they a CUSO, they are also now part of Alloya Corporate Federal Credit Union, which means even more CU connections. They can help you provide the funds your members need, deposited into their checking account in under 60 seconds, day or night, using any device, regardless of their credit score. For some of your members, this could be life-changing.
When your members want something reliable
Some of your members are more concerned with transportation that’s reliable AND affordable, and would love to have an option to traditional new and almost-new car loans. Especially if there are no public transportation options that will get them to their jobs on time.
So why not roll-out an eBike program instead? eBikes are getting more and more popular, plus they come in at a price point that is usually lower than even used autos or trucks. And even though cities and states across the US and Canada are already rolling out programs to make e-bikes more accessible to lower-income residents, that doesn’t mean that your CU can’t offer your own eBike financing for everyone else.
For those members that just don’t think an eBike is a realistic option, a program that finances “not-so-new” wheels could be the perfect solution for imperfect cars that still get them to work.
When your members want to go green
Climate change is becoming more and more noticeable, and more and more of your members want to do what they can to help. Green loans are typically taken out to upgrade existing homes with water and energy-saving features, such as adding insulation, solar panels, heat pumps, electric furnaces and on-demand water heaters.
Federal tax credits help offset some of those costs to encourage these changes. Several credit unions, such as Vermont State Employees Credit Union, have already been promoting personal loans as green loans to their members, and some utility companies are offering their own financing for heat pumps. Regions/EnerBank has even been targeting contractors that install heat pumps and handle other home remodeling projects. So what are you waiting for?
When your members want to follow their dreams
Every member has a dream. It could be going to college or grad school in order to get that degree. It could be traveling the world, visiting the homelands of their ancestors, studying monkeys in the jungle, or spending time on an archaeological dig. Or it could be becoming a citizen.
Sometimes those dreams are smaller, even rather oddball. But personal loans are built for almost anything, and a personal loan can be called whatever you want, so why not let your members make it personal? Why can’t they borrow enough money to get a nice home brewing system that lets them share their creations with their friends and family? Why can’t a home baker start creating amazing decorative cakes for family parties?
They might even turn it into a real business. A business that has lots of potential customers surrounding it, helping to revitalize a neighborhood where everything is a 15-minute walk, bike or transit ride away, including one of your branches, making it easier for them to get a loan for their second location.
Remember, dreams are possible if you make it possible.
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