Callahan Clients, please log in for direct access to:
Learn What You're Missing
Upgrade Your Subscription
Thank you for your interest in reading the fantastic content we have on CreditUnions.com! However, the page you are trying to access is for subscribers-only. To learn more, select an option below.
All users must now log in to read, research, browse, and have fun on CreditUnions.com. Yes, we still offer freebies. And, yes, it’s worth the extra effort.
Print or PDF this article today because you won't have access to it later. Or, click here to learn how to get 24/7 access.
Financial institutions today face a host of challenges. Between gaining new customers, maintaining current customers, keeping up with changes in technology, and fighting off competitors, financial industry executives deal with considerable pressure. And, let’s not forget the requirement to increase revenue, loan production, and institutional performance.
Performance is often measured by institutional results. This means both maintaining and protecting existing loans (and their projected revenue), as well as growing overall loan performance. Loan portfolio performance can significantly impact the net results of the financial institution in achieving growth and revenue goals.
Perhaps these important lending requirements have resulted in the emergence of technology services — referred to as “Online Loan Modification Services” — that provide the financial institution with new methods of tackling these challenges. Online loan modification services can help the institution retain existing performing loans, increase the potential yield on the portfolio, and provide consumers with an opportunity to reduce their monthly loan payment amounts.
Online loan modification services enable financial institutions to target select consumers to participate in the service offering. The consumer is empowered with interactive engagement technology that allows them to explore a variety of modification options available for their current loan, allowing them to make their own personal financial decisions.
These decisions often result in a lowered monthly payment for the consumer while benefitting the financial institution with increased yields on the retained and modified loans. Personal financial decisions are made and completed by the consumer entirely online, in privacy, without the hassle of traditional refinance programs.
Online loan modification services significantly increase the revenue and yield of an existing loan portfolio. By allowing consumers to lengthen the terms of an existing loan, your institution will experience an uptick in the modified loan yield without extending additional money to the consumer. Many financial institutions also increase the APR associated with the term extensions on the modified loans — considered “re-pricing” of the existing loan — as a service fee for the extension itself. This further increases the revenue associated with the modification and resulting retention over the newly projected term of the loan.
Institutions are realizing impressive financial results after offering an online loan modification service available to their select customers. One such institution has experienced over 1,100 loan modifications in the past 11 months, with an average yield increase of 43 bps, resulting in projected net revenue increase (after the cost of the service is removed) of over $1 million on the modified loans.
This demonstrates not only that consumers adopt and utilize the modification service in substantial numbers, but the net increase in portfolio yield, like the example mentioned above, should make any institutional C-level executive take note.
Customer retention often hinges on incentives and experiences. If your customers are having a successful experience with your institution, they are more likely to stay with you and potentially expand their relationship into new accounts and add-on services. Loyal customers are the best defense to increasingly aggressive competition, especially in the loan refinancing market.
Loan retention is even more important with an indirect loan. When financial institutions are paying a car dealership to originate the loan and place it with the institutions, they risk losing more money when a customer takes their loan to a competitor. The financial institution loses on the investment it’s made with the dealership and the expected revenue from the loan itself.
Keep your competition away and produce customer loyalty through incentives and a positive user experience. Because the loan modification service works in real time, customers are more apt to use the feature and keep their loan with your Institution. This immediate loan adjustment is not only convenient; it gives them autonomy to navigate their own personal financial future.
Unexpected life events can impact one’s financial situation. Medical expenses, family requirements, children’s education costs — all can be navigated by allowing the consumer to reduce monthly loan payments and achieve the benefit of greater monthly cash flow, and without the stress or costs associated with traditional loan refinancing. Providing this valued service to your select consumers to make their own financial decisions is not only an incentive for a customer to stay with your institution, but it also conveys a spirit of trust and goodwill from the institution towards the consumer.
If your financial institution is concerned about retaining and protecting existing loans, finding new ways to increase existing portfolio yield – and improving customer loyalty — then IMM would like to invite you to explore our Online Loan Modification Service called easyReset.
EasyReset is a groundbreaking loan modification service embedded with IMM’s advanced eSignature technology. Selected customers have the opportunity to explore loan modifications via an engaging and interactive online user experience. Consumers can reduce current loan payments with privacy and ease, electronically sign loan modification documents in real time, and complete the loan extension transaction without having to interact with any institution employee.
Michael Ball, Vice President, Markets and Strategy
This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.
If you are interested in contributing an article on CreditUnions.com, please contact our Callahan Media team at email@example.com or 1-800-446-7453.
November 9, 2015
Submit your email address to receive daily industry updates and web-only features.
P: (800) 446-7453 | F: (800) 878-4712
1001 Connecticut Ave. NW Suite 1001
Washington, DC 20036