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Financial institutions—almost everyone deals with one on a regular basis. Everything from a cash deposit to making a financial investment and taking out a loan can be conducted through a financial institution. But, did you know that 61% of borrowers still DO NOT fully trust the financial firms they conduct business with on a regular basis. As a lender, this number may or may not come as a shock. So, how can you begin to improve that number while keeping your bottom line top of mind?
While borrowers' needs vary, the one thing that remains consistent time and time again is that they want products and services that offer value to their financial portfolio. Being too "salesy" with your product offerings is not always the best approach to build long-lasting relationships with your borrowers. The key is to offer products and services that meet their needs, and as an extra little bonus for your institution—generates non-interest income.
Payment protection programs are designed to provide a safety net for unexpected occurrences such as loss of life, disability or sickness, loss of a job, and/or other unforeseen events. There are two types of products: credit insurance and debt cancellation. Both programs help cancel or suspend debt that a borrower owes to a lender. When a borrower chooses to add a program to their loan, it can assist by making monthly payments or paying off the loan in its entirety should one of the previously mentioned unexpected situations occur. Additional benefits include keeping the loan current with its payments, reducing delinquencies and foreclosures for both the lender and borrower, and ensuring that there is one less thing for the family to worry about during a time of emotional stress.
When a borrower decides to add this program to their loan, they are agreeing to have an additional expense tacked onto their monthly payment or the total loan. This may not sound like an attractive offer. However, helping a borrower understand the tangible and intangible benefits that these types of products offer may help them feel more at ease with adding this protection to their loan. Borrowers are looking for products that offer value, and the lender is looking to provide valuable products—a win-win for all parties involved.
Since this protection is added at the time of obtaining the loan, it is also one of the most convenient ways of obtaining financial protection. Besides the fact that you are providing good value, you are also meeting a need--whether or not they know right then and there that they have the need. With this point-of-purchase add-on, payment protection can effortlessly become a simple product for your employees to discuss, resulting in protection for your borrowers and your financial institution.
Unless someone has had a previous experience with this coverage--whether on a previous loan or through a previous offering--they probably will have little knowledge of what this type of program entails. That is why it is important for the lender to educate the borrower on the product as much as possible. The only way for your sales staff to adequately inform someone about this program--or any offer, for that matter--is for them to have been adequately trained on the product themselves. When your sales staff has the proper training, confidence will follow and so will the likelihood that they offer this beneficial program to 100% of their customers, 100% of the time. Results of a properly trained staff will render in increased sales and an improved bottom line.
So, while your institution is able to offer a valuable program, what you are ultimately offering is a product that is truly invaluable to your financial institution and to your borrowers. Should the unfortunate time come when a borrower needs to engage their coverage or even if they never end up using it at all, they will have the priceless benefit of peace of mind. For your institution, yes, you can calculate the amount of non-interest income earned and the money saved from delinquent loans, but what truly matters is the trust that you are gaining from each person that is offered a product to make them feel more at ease. Remember, in order to build long-term relationships with your borrowers, you must be invaluable to their financial success.
Learn how our payment protection program can impact your institution. Click here to download our program overview now!
Joan Cleveland, CLU, ChFC, REBC leads SWBC Life Insurance Company as President and CEO. With more than 30 years of experience in the life insurance industry. She holds her Agent licenses for Life, Accident, Health Insurance, and has multiple FINRA securities Licenses. Joan is a frequent industry speaker and media spokesperson. She is a member of the Board of Directors of the American Bankers Insurance Association, and co-chair for their Government Relations Committee. In addition she is chair of LIMRA’s Strategic Marketing Issues Committee.
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