Six Keys to Making More Loans at a Lower Cost

Usually when you get free advice, it’s worth about what you pay for it. Today is an exception. Here are the six most valuable components of a credit union lending program you need to align to make more consumer loans at a lower cost:

1. People. Do you have trained sales people capable of identifying needs or are they merely order-takers?
2. Compensation. Does your compensation structure motivation appropriate behavior and results?
3. Risk tolerance. Are your underwriting practices not too tight, not too loose, but just right?
4. Operations. Are your policies member-focused or written for examiners, perhaps inhibiting your ability to make loans?
5. Delivery channels. Are you structured solely around branch lending or have you evolved your delivery channels to keep pace with online and mobile options?
6. Technology. Are you leveraging today’s latest technology to deliver a seamless application process, underwriting, closing and servicing?

I intentionally listed “people” first. Nothing can substitute for a confident, expert lender capable of conducting a quality loan interview. Conversation is paramount, not filling in the application blanks. A solid interview reveals important information to help structure a loan properly and often unearths additional member needs. Also, you build trust and can boost member satisfaction.

$327 million Kohler Credit Union in Kohler, Wis., illustrates how aligning these six factors can yield mind-blowing results. In 2007, the CU originated roughly $200,000 in consumer loans per lender per month. By 2016, this jumped to $1 to 1.6 million per lender per month, while annual fee income from ancillary product sales rose from about $30,000 to over $800,000!

SVP/Lending Dale Livingston attributes the CU’s success to adopting these six lending recommendations in 2008. Kohler CU lenders are now centralized and all requests queue in from various delivery channels via the red “Batphone.”

“We don’t lose any loans,” Livingston says. “When our member is ready to take action, whether they are at an auto dealer or in one of our branches, we respond immediately.” Members know they are getting equitable, expert attention to their requests.

“It’s unfortunate, but with non-centralized lending, members can get different decisions from different lenders and at different branches. Our process ensures consistency and fairness. And, because our lenders do such a high volume, we can recommend creative solutions that are often better than a member’s initial request,” Livingston notes.

Aggressive but smart. That’s a good way to describe the ideal credit union lending program. We have a more noble cause than simply making a loan; we are mission-driven to help members who are less than perfect financially get back on their feet. Boosting the performance of your loan portfolio will make it possible for you to help more and more members for years to come.

Brett Christensen, owner, CU Lending Advice, Euless, Texas, has a well-deserved reputation as a lending expert.