As Banks and Large Lenders Scale Back and Exit Indirect Lending, Credit Unions Can Capitalize Through Software Automation

While most sectors are feeling the bite of sharp declines in home and auto sales across the country, credit unions and CUSOs are faring better than many of their larger lending counterparts.




While most sectors are feeling the bite of sharp declines in home and auto sales across the country, credit unions and CUSOs are faring better than many of their larger lending counterparts.

According to a recent article, credit union auto lending market share has been steadily increasing since the beginning of 2007.  “Indirect loans originating from credit unions took up 15.8% of the market in January, and that figure jumped to 20.5% by August.”

Several of the large financial lenders (GMAC, Chrysler Financial) and many banks have tightened their lending policies while others have completely exited the market.   Some auto manufacturers are no longer offering leasing terms.  As growing numbers of consumers turn to credit unions, it is a great time to capitalize on the opportunity.

Credit unions already engaged in Indirect Lending, or those thinking about Indirect Lending offerings, must be prepared to manage the increased volume of loan applications, give fast approvals, and closely manage risk.   By using software for the complete loan origination process, credit unions can automate the process for dealers and provide automated underwriting, and manage criteria carefully.

The bottom-line result of using a software automation solution for indirect lending is the ability to have high productivity without adding additional staff.   The entire loan process can go paperless in a highly effective program that allows you to be competitive while gaining higher loan volumes.

What should you look for in an effective Loan Origination Software Solution?

  • Supports both Indirect and Direct lending – so that you can use one system for both sides of the business, providing for easier training and ongoing IT support
  • Easy, intuitive web-based interfaces
  • Bi-directional, real time integration with core systems
  • Strong reporting capabilities
  • Automated credit checking



Nov. 17, 2008


  • Great opportunity to get more loans and potential members.
  • Increased productivity is certainly a good thing, but how do we know what we are earning on indirect lending? Most credit unions I have seen are actually getting returns that are well below those available from agency securities, with a lot more risk.
  • great
  • I agree with comment #3. There are risks and profitability depends upon how you manage it. With the right platform, you can achieve a level of efficiency and business analytics that was never possible before. Teres has allowed us to take market share during the recent month (without increasing costs) and we can measure the returns already.
    Ed S
  • Automation = Decreased Costs and Increased Efficiency and Uniformity across decisions.
  • Interesting read!
  • Robust reporting capabilities can really help to keep your eye on where you stand in the business. The ability to constantly monitor is one of many key aspects needed.
  • CU's have an opportunity to once again capitalize on mistakes made by the banking industry. Careful consideration is mandatory... we'll see how CU's fair.
  • If the goal is to get the best possible borrowers from the pool of Indirect loan applications, then an automated solution that delivers an instant decision is absolutely critical. Good article.
  • Interesting read. The ability to increase loan volume without adding staff is very appealing.
  • Great article.
  • Indirect can be a profitable lending channel but it all comes down to risk and how you manage it. Even after dealer reserves, charge offs, cost of funds and PLL transfer we are doing very good. However, managing the yields and minimizing losses is what makes for a profitable indirect lending program. Even your direct lending channel will be unprofitable if you underwrite too deep and give away rate. By having an efficient process and system to originate and underwrite loans your overall cost will decrease and profitability increase regardless of lending channel
    Pierre C