How Canopy Credit Union Uses Personal Loans To Improve Members' Financial Lives

A one-day-only promotion that mixes financial counseling with loan growth opportunities has been a roaring success since it was introduced two years ago.

 
 

Top-Level Takeaways

  • Canopy Credit Union’s one-day personal loan campaign was so successful it was temporarily expanded to an entire week, before reverting to a shorter period after lenders were overwhelmed
  • The most recent one-week promotion resulted in a nearly identical dollar amount of loans as the week-long promotion, without the stress on staff
  • Loans can involve financial coaching for applicants who struggle with managing credit card and other debt

Personal loans have long been a staple of most credit unions’ lending strategies. One of the reasons credit unions were created was to serve everyday people who had been overlooked, if not ignored altogether, by traditional banks.

Canopy Credit Union ($208M, Spokane, WA) honors that legacy with its mission to serve and help the underserved and unbanked members of the communities in and around Spokane realize a better and more enlightened financial life.

This one-day promotion champions one of the credit union’s most successful lending products, personal loans, by offering special competitive rates for members who apply that day. The promotion is offered twice per year, first in February when loan demand is low, and again in October to celebrate International Credit Union Day.

“We started one-day personal loan campaigns in 2019, right after we rebranded to Canopy Credit Union after being Spokane Federal Credit Union since 1956,” explains CEO Charlotte Nemec. “Our lending staff and financial coaches were seeing a lot of one-off situations with people who had multiple credit card balances and payday loans that were becoming unmanageable for them. They were basically looking for debt-consolidation loans.”

Charlotte Nemec, CEO, Canopy Credit Union

Financial coaching forms the core of Canopy’s lending practices, from mortgages to vehicle and personal loans. Members of the lending team are either certified as financial counselors or on their way to certification. A marketing team member performs the greater part of the credit union’s in-depth financial coaching efforts.

The one-day loan specials from 2019 to 2021 were so successful that Canopy decided to temporarily expand the promotion from one day to an entire week for the special in February 2022.

“That was an experiment that ended up placing a hardship on our staff,” recalls Nemec. “Demand was so high, and our staff was trying to balance a larger number of loan applications and still respond promptly to our members’ requests. We learned an important lesson about inadvertently creating too much stress for our lending team. We went back to our original one-day loan special.”

During the hectic week that ensued during the week-long promotion, Canopy saw that even though they funded $830,000 in loans, the effort and toll it took on staff to respond to loan requests in a timely manner was just not worth adding the additional four days. 

“We do have to pay attention to the whole picture,” says Nemec. “We funded 116 applications with an average loan amount of $9,000. The ROI compared to the week-long experiment was nearly the same. Most of the applications were made through our online channel, which can lead to an automatic approval. But under some circumstances, we had to step in with a lending officer to manually evaluate and approve a funding decision.”

This year the loans were priced at 6.49%, a nominal increase from the 5.99% seen in the past. Nemec attributes the modest increase to changing market conditions and the rates for unsecured lending. “Still, we offer a highly competitive rate in the current borrowing environment,” she adds. “We need to be mindful of the ROI and ensure we’re paying the credit union as well as making our members successful. It has to be a win-win for all parties involved.”

Just Add Financial Coaching

Despite the growth opportunities, Nemec says personal loans can get the best of many people who fail to understand the consequences of accumulating more monthly payment obligations than they can afford –especially loans at onerously high rates, such as those from payday lenders

“When we approve a personal loan during the special promotion period, we may encourage on-the-spot coaching and a meeting if the member needs some additional financial coaching,” said Nemec. “Coaching can happen over the phone or via Zoom meetings as well. This is a critical intervention to give these borrowers the advice they need to follow to avoid coming back to us years later with the same set of debt problems.”

When Canopy approves a personal loan to consolidate debt, the credit union may manage the payoffs when the borrower has multiple creditors.

“We had a member come to us with nine credit cards that had untenable balances for the member to handle. We paid off all of them,” remembers Nemec. “The beautiful part of what we do is the member sees immediate relief from the consolidation.”

Nemec notes that Canopy is hardly unique in managing what she called “controlled payouts.” She says many other credit unions follow a similar practice, setting up the member for a better financial life free of the stress caused by excessive debt.

Canopy spends little to market the one-day loan specials. It avoids the costs of direct mail marketing or printed materials by working closely with the credit union’s business partners and SEGs, who in turn promote Canopy’s loan specials to their members. The credit union announces the promotion to those partners two to three weeks in advance of the loan special, along with promoting it on social media channels and via online and mobile banking.

“As long as your lending team is prepared for an influx of volume and you have a solid set of underwriting criteria, which we do, a credit union can have staff available via phone or Zoom to ensure the loans are processed in a timely manner with minimal risk,” said Nemec. 

Nemec says that rather than just booking loans for the sake of growing the loan portfolio, “we’re more focused on truly making an impact and a real difference in our members’ well-being and helping them better understand their finances. We want to help make our members stronger citizens so they can build a more robust community through financial inclusion, equal opportunity and success.”

Canopy’s next one-day loan special event is scheduled for International Credit Union Day, on October 26, 2022.