Building a profitable and flourishing indirect lending program takes a tremendous amount of investment — both in time and resources. Some lenders think that simply having the right loan software will help them pad their portfolios and exceed their competitors. The truth is that a credit union that isn’t prepared to excel at all five areas of an indirect lending program will not last long.
Here are those five crucial areas of focus and a useful tip to consider when evaluating the strength of your program:
Technology: One size does not fit all when it comes to various credit unions and their indirect lending programs. The loan origination system your institution utilizes for its program must be easily configured to exactly fit your operations. You will likely need to prioritize certain products over others at times, and your platform will need to be configured to give you that flexibility. Without this needed flexibility, your indirect lending program never stands out from the competition.
Dealer management: The easiest way to get passed over or dismissed at the dealership is to look lost. Know where you’re going and who you’re looking for when you set foot on the lot. Be polite, but don’t get stopped by gatekeepers such as the receptionist at the front desk. When talking to the decision makers, be direct and to the point. Ask what you need to do to get their business while also telling them exactly what you’re looking for from them. Otherwise, dealers will be likely to test you by sending you lower-grade paper.
Underwriting: Stipulations can be a real annoyance for dealers looking to close business quickly. They are meant to protect the lender on high-risk loans, but they can be frustrating when overused on low-risk loans, complicating the entire process and costing more time. For example, a stipulation to avoid on a low-risk loan is the requirement to provide two references for applicants with high scores. With this stipulation, it is likely dealers will avoid institutions with those types of across-the-board stipulations for applicants, regardless of scores.
Processing and funding: Be sure the program guidelines and decisions sent out to the dealers are very specific and easy to interpret. Dealers need to know if you allow back-end products to be added or if they are included within the approval. It’s also important to let them know if you require proof of income for both borrowers. Loans can be delayed because the dealer misunderstood the approval, the stipulations provided, or the program parameters.
Reporting and consulting: Access to data and advice should be readily available. This includes both quality and quantity when it comes to reporting. There are a number of sources out there, but knowing exactly where to turn for the information to keep up with your benchmarks can be difficult. This is where the expertise of your outsourced indirect lending solutions provider really makes an impact. Your provider should be available for regular meetings where everyone sits down together and runs through every aspect of the lender’s program from both the quarterly as well as the year-to-date perspectives.
CRIF Select offers the tools and expertise to help any credit union build and maintain a superior indirect lending program. But the suggestions listed above for each aspect of your program are just to get you started. Here’s a tip: Select will be hosting a complimentary webinar at 2 p.m. ET, Tuesday, June 28 that will focus exclusively on best practices for your dealer management efforts. Click here to register.
For a complete guide on how to build or strengthen each portion of your program besides just dealer management, please click the button below to request a copy of our Universal Roadmap for Indirect Lending Success.