New normal? Time to rethink lending.
In 2020, we have all acclimated to new concepts like social distancing, quarantine and face masks. This new reality makes it necessary to consider the implications for our business and for our members. Without a doubt, times have changed and so should our lending to meet the demands and needs of our members. We, as leaders and economic experts, have to stand out and create new paths in this uncharted territory.
Having an appetite
Without an end in sight, financial experts have to ask what we can do to help our members. Are we asking every member, “How are you personally faring with this pandemic?” or “Is there anything we can do to assist you?” Our questions can conjure our member’s appetite to inquire about the solutions we have to help them through their situation.
We also need to evaluate our credit union’s appetite. Are our products lucrative and tolerant enough to stay competitive? Most credit unions are too restrictive on terms, which create payments that become out of reach. Have we become too judgmental? Maybe we say that if we wouldn’t buy it, it must be a “bad loan” and then deny the member. Offering products that make a difference builds lifelong desire to sustain that relationship from both ends.
Trying the flavors
What kind of loans are we marketing that adapt to our members' needs? There are some products that are actually thriving as of late. Ice cream is one of them. Ice cream sales are up and, oddly enough, deodorant sales are down.
Using this as a metaphor, these “ice cream” sales in lending equate with exactly how people are spending their time right now and that is enjoying home and creating memories with family. The “deodorant” in this case represents traditional lending, such as new car sales and credit cards.
If a CU is going to endure, we need to try all the flavors of the ice cream. In other words, what can we do to provide the products that are prospering? The answer to this question might just be a new path for your CU, but members have to feel that they can endure and even persevere in these trying times.
While traditional lending is typically associated with essential items like cars and credit cards, the products that are flourishing right now are for non-essential items.
Consumers are seeking comfort and outdoor experiences. Disney theme parks and ocean-liner cruises are out, but camping, boating, RV-ing are in. Pools and hot tubs are a hot commodity. Boat sales are higher than they’ve been in two years. If we don’t get on board, other businesses will swoop in to satisfy our members and our members will be swayed not to choose us for their next car purchase, too.
These are the top five loans CUs should be marketing right now to meet member demands this summer and in the fall: hot tubs, boats, RVs or camping-related vacations, home updates and safety improvements and pools.
A broadened horizon
Lending with non-essential items can be easy if we stick to a few key principles. Ask a member if they have any unsecured debt. Is the unsecured debt over 20% of their gross annual income? Are they living on inflated income? How much has the debt increased in the past 12 to 24 months?
Always take a close look at equity options as well. Can we expand our LTV limits? Other solutions that can help might include:
- Three months no payments/skip a pay.
- Consolidating credit card debts into one loan payment
- Equity loans.
- Back-to-school loans.
- Saving for Christmas now.
The definition of persevering is “persistence in doing something despite difficulty or delay in achieving success.” We can be there for our members. They will never forget you if you are.
Not only do we need to celebrate with our members, but we need to deliver the products and services for not only them but for us to persevere, too.