Car Loans
By Rory Rowland
Digital Credit Union has increased their car loan portfolio by 25% and 35% over the last two year respectively. That is a tall order for a 1.3 billion dollar credit union. How does a 1.3 billion dollar credit union increase their market share so fast, and by so much?
It is a pre-approval program that makes it easy for the member and the employees to work together to grant car loans. Diane Richards, Vice President of Lending sees Digitals loan officers as loan granters, not just loan officers. Diane says we want to get great loans to great members, fast. The way to do that is by not waiting for the member to apply, but letting the member know they are approved before they apply. Now that is service. They have the attitude of being ready before the member knows they want a loan. They have a motto; “we are ready before you are.”
The credit union has over 164000 members and they have over 80,000 members who are pre-approved for car loans with by their car loans. This gives the credit union a tremendous advantage in gaining car loan market share. And by the loan growth of the last two years, it is a program that is working.
Digital Credit Union has a pre-screen process with Experian their credit bureau. Diane Richards has developed a pre-screen formula where they look at the member’s credit score and history, and then can pre-approve them for the loan. The success rate speaks for itself. The delinquency rate is less than ½ of 1 percent, and the charge-off rate is less than .35 of 1 percent. These are excellent numbers for a pre-approved loan program. And still their car loan portfolio has grown by over 25% and 35% in the last two years.
When the member calls in to the call center, the pre-approval information pops up right in front of the call center employee. They can remind the member instantaneously that they are pre-approved. Diane says you have to remind the member that you value your relationship with them. The way to do that is be ready before they are.
Digital Credit Union also shares the approval information with Lending Solutions. Lending Solutions is a third party call center for loans. Digital Credit Union shares the magnetic tape of members who are approved so that they can process the loan for the member more quickly. For example, a member calls the credit union to receive a car loan. It is after hours so Lending Solutions receives the call. Lending Solutions could process the loan through the normal channels, but since Digital Credit Union shares the tape with Lending Solutions, and Lending Solutions knows the member is pre-approved. They just let the member know they are approved over the phone almost instantly. The members love this level of service. Diane says you have to make it “fast, simple and easy.” She says make it too complicated and they will go somewhere else.
Digital Credit Union also gives the member the opportunity to pay cash with their car loans. When a member calls into the credit union for a car loan, they are told right away that they are approved. But the member has another option to finance the loan in the normal channels, or the member can write the car dealer a check. The credit union will provide a blank check to the member, and the member can fill in the amount. It has to be a licensed dealer to process the check, because the credit union needs the dealer number in order to cash the check. Diane says the “members just love paying cash, and getting a better deal. They can go in and negotiate just like they are paying cash. There is no delay and no wait for the approvals.” Diane says, when they have the check in hand all they have to do is “negotiate and drive their new car home.”
You can grow car loans, even if you’re a large credit union. You just have to put a priority on making it easy for the member, and then put the systems in place to make it easy for your employees. If you do that, you too can grow your car loans by over 25% a year.
