AUSTIN, Tex.-Auto loans are being paid off sooner, which means credit unions have to work harder to keep the pipeline filled.
Teres Solutions reported that many of its credit union clients are seeing auto loans being paid off in 20 months or fewer; in 2009 that rate was closer to 27 to 30 months. "Maybe it is because credit unions are loaning to higher FICO score members who may be more affluent, put more money down, and are able to pay the car off quickly," observed CEO Tim Kelly. "Whatever the reason, credit unions are needing to churn out more loans to support the bottom line because interest rates on their investments are so low."
Auto recapture programs are key now to attracting loans, Kelly insisted. "In the world of 0% financing, with the captives and banks back, credit unions have to have some kind of quality auto refinancing program to get some of the business back from these guys."
Merchant lending can also help fill income voids, and Kelly recommended establishing programs with local retailers and businesses, like furniture stores and dentist offices. "These are higher-yielding loans, generally 8% to 12%," Kelly said. "As long as this portfolio is big enough, you can support the risk."
