OMAHA, Neb.-One way to increase loan volume is to get members to take out two loans at a time.
That's the strategy behind Centris FCU's BOGO (buy-one-get one) loan program, which helped it pick up volume right when loans began to tail off, explained Seth Swier, AVP of financial services.
"We just tried to increase our opportunity to make more cross sales and make life easier for our members. They can bring over another loan, pay only one financial institution, and get a lower rate-and we get more volume."
Swier said Centris modeled the loan program after what retailers often do-let consumers buy the first item at regular price and then the second purchase is half off. The promotion applied to loans for auto and recreational vehicles, and for boats and motorcycles. Centris gave members its going rate on the first loan and then cut the second rate in half, down to as low as 2.5% APR.
The biggest bang, said Swier, came from members taking out a car loan and then refinancing their recreational vehicle or boat. "We brought several rates down from the 8% to 10% range, to 3% to 5%."
The program fared well, attracting 30 pairs of loans for more than $1 million in four weeks, helping to boost overall loan volume in June, year over year. Auto loans ($4,506,920) were up from June 2010 by $1.2 million, and RV, boat, and motorcycle loans ($805,266) were up by $50,000.
"Usually, late April and May is when our highest amount of auto loans occur," explained Swier. "But this year we seemed to have done better in early spring-loan demand started in February but began to cool in May. Bringing in this promotion in June brought in a decent amount of loans we would not have gotten otherwise, and more attention to our loan program."
Centris FCU's normal new car loan rate for a good credit score is in the upper 4% range to lower 5%, and the credit union cut rates to $2.5% in some cases on the half-price offer. Centris' standard recreational vehicle rate ranges from 6% to 8% for A paper.
Swier said the BOGO loan drew more attention to the credit union than a standard loan sale, where the credit union cuts auto and RV rates across the board. Plus, it costs the credit union less. "You can take all of your auto and RV loan products and cut the price by 20% to 30% and call that a sale. Or you can do the more interesting BOGO approach, and overall you end up with a little more yield than just cutting 20% to 30% of all your inventory. We looked at the numbers and said that instead of maybe getting our average $12,000 car loan at 3%, if we discounted everything, we get two loans in the $20,000 to $30,000 range and an overall yield of 3.5% to 4% on two loans."
