NAFCU Services Blog

Jul 25, 2018 by Allied Solutions

How to Build a Loan Program that Attracts All Consumer Demographics

By Brian Timson, National Vice President, Partner Development & Innovation

There are a lot of companies out there competing for your loan business. At the same time, rates are soon going to increase, which will lessen the pool of prime and super-prime borrowers and make loan revenue even harder to attain.

But while these challenges exist, they also open up the door to new opportunities for attracting more consumers and achieving larger loan yield – you just need to start thinking outside the box with your loan offerings.

So how exactly can you revive your loan program to attract more borrowers without isolating current borrowers or expanding your risk?

1.  Understand the different loan needs of current & future consumer demographics:

  • Baby Boomers (currently make up the large majority of financial institutions’ consumers):
    • Rate-centric: They are more focused on loan rates than term lengths/flexibility
    • Satisfied with more traditional loans, as long as they can keep their lower monthly rates
    • Includes many prime and super-prime borrowers
  • Millennials (soon to become the largest consumer base for financial institutions):
    • Payment-focused and term- centric: Not fans of long-term commitment, unlike baby boomers
    • Looking for non-traditional loans that allow for shorter/flexible term commitments and affordable/flexible payments
    • Largely made up f non-prime borrowers, many of whom have negative equity resulting from student loans and/or credit card debt[1]

2.  Expand your lending channels beyond traditional auto & mortgage loans to attract the newer, younger markets. These include student lending and refinancing programs, specialized mortgages for first-time home buyers, residual-based financing options, small business loans, and crowdsourcing programs.

3.  Adjust the terms and conditions of your loan products to offer more flexible repayment options.

4.  Invest in third-party collateral risk management services to protect your expanded loan portfolio with little-to-no impact on your day-to-day operations.

5.  Leverage the right data to build a more accurate picture of your current and prospective consumers, predict borrower risk, and personalize interactions and sales communications.  

6.  Offer loan education programs to build consumer trust and reduce loan risk by helping first-time borrowers make smarter, more informed loan purchases.

7.  Give the ‘Amazon treatment’ to all consumers by delivering a consistent customer experience – from loan fulfillment and servicing to customer service interactions – that is easy, accessible, and relevant to their needs; in a word: pleasing.

By diversifying your loan options, channels, and terms to include these recommended additions, you allow yourself to attract emerging consumer demographics (Millennials & Gen Z), while not damaging relationships with your current consumer demographics (Baby Boomers & Gen X).

The more you willing you are to expand your offerings and the more pleasing you can make interactions for all consumers the better chance you’ll have of delivering real value, building trust, and winning sales across all consumer demographics.

Listen to the first two installments of our Loan Growth Podcast Series to learn more about evolving your loan program to remain competitive and successful:

Part 1 How to Achieve Lending Growth in an Increasingly Crowded Market

Part 2 Growing Your Market Share by Targeting Millennials

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Allied Solutions is the NAFCU Services Preferred Partner for Insurance- Bond, Creditor Placed (CPI), Guaranteed Asset Protection (GAP), and Mechanical Breakdown Protection (MBP). More educational resources and partner contact information are available at Sign up for Allied Solutions’ newsletter to receive ongoing education on collateral and compliance risk management.

[1] “Balancing the Risk versus Rewards of Financing to Millennials.” Auto Remarketing, 14 Nov. 2017,….

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