Indirect loans are becoming increasingly popular in the modern lending landscape. While these products can be great for borrowers seeking the best rates and financial institutions hoping to expand their business, indirect lending also creates a unique set of challenges, especially when it comes to collections.
Many may view indirect lending as a short-term transaction with little opportunity to grow into a full banking relationship, but there are ways to build your indirect portfolio into a long-term avenue for generating growth within all facets of your business. In this article, we’ll discuss collections strategies you can employ to help turn a delinquent loan borrower into a member in good standing at your financial institution.
Make it easy for indirect borrowers to make payments
Indirect borrowers have the largest need for a convenient method to make payments on their delinquent loans—especially because this is often the only loan they have with you—and if your online banking solution is only available to current customers with checking and savings accounts, you're leaving your indirect borrowers at a major disadvantage—especially if their account is in collections!
When your borrowers have a convenient payment platform that is available 24/7 with multiple payment options (credit or debit card, checking or savings account, internet PIN debit), they are less likely to experience delinquency issues due to lack of convenience. When your collections team does not have to spend time and resources contacting borrowers that are late on their payments (simply because they haven't had time to make a payment that’s inconvenient to process), it allows them to focus on borrowers that are truly delinquent and in need of a mutually beneficial solution.
Offer indirect borrowers free financial education
Don’t overlook the opportunity to provide a delinquent borrower with financial education. With the proper educational resources and direction, an indirect borrower who is behind on their loan payment today could easily become a member in good standing tomorrow.
The best way to provide cost-effective financial education is to create an accessible library of resources on your website and/or online banking portal. The library could be split into key topics, based on the help your members could be seeking, such as:
Budgeting and Saving
Buying a Car/Home vs. Leasing/Renting
Paying for College
Saving for Retirement
Within each topic, you would include relevant, easy-to-understand resources, such as tip sheets, guides, calculators, short videos, tutorials, and any other items that your customers and prospects may find valuable.
Turn indirect borrowers into accountholders
Indirect borrowers may never visit the institution they loan from—and oftentimes they don’t even speak to a lender at the institution before signing papers! It is a good idea to have a collections strategy in place for these borrowers. Even if you never meet your borrowers face-to-face, it is important to maintain the same level of communication and customer service your institution is dedicated to, no matter where the loan originated.
One of the best ways to turn indirect borrowers into account-holders at your institution is to consistently provide them with stellar service through their preferred channels of communication. Offer help with their payments and use the opportunity to make friendly suggestions of complementary products through periodic personal check-ins by phone and email. Meeting your borrowers where they are and extending your brand personality into the realms they’re most comfortable with, can make a significant difference in their customer experience—and increase the odds that they’ll come back the next time they need a loan or other product or service.
The advantages of providing solutions for your delinquent indirect borrowers can lead to strong relationships with potential new customers. Compare your collections options today by downloading our comparison guide.