Does your loan program serve your members?
by. Brett Christensen
Don’t lose sight of members’ perceptions.
Not surprisingly, a credit union loan program that effectively serves members is more likely to rate well on other lending metrics, such as loan-to-share ratio, loan growth, and delinquencies. But as you lead your people through the trenches of making loans every day, it’s easy to lose sight of how members perceive your lending operation. When you’re ready to take a pause and consider this key question, here are some food-for-thought questions you’ll want to answer:
- Are you offering the loans your members need? If you don’t have credit cards, mortgages or business loans, you are just inviting your member to go to a competitor. And the problem with sending them to a competitor is that they might find out they like it there and not come back.
- What is your denial rate of consumer loans? I can make the case that this is the most important number to your members. They could care less about your return on assets, expense ratio, “misery index” (delinquency and loss ratios) or cost of funds. I think that if you are SEG-based, you should be looking at a consumer loan denial percentage of 10 percent to 15 percent and, if you are community based, you should be no higher than 20 percent to 25 percent. Please note that I am just fine with a 40 percent to 50 percent denial rate on indirect auto loans because it is inherently higher risk.