In the wake of the consumer movement to shift deposits from big banks to credit unions, culminating in Banks Transfer Day on November 5, credit union loan-to-share ratios are likely to drop significantly. And raising them will be difficult, given the continuing poor forecast for loan demand.
Even so, this new liquidity—and the priceless boost in the public’s awareness of the credit union movement—create a unique opportunity. Reach out now to members who can save money by refinancing existing loans from other lenders.
Captive financers have left the back door open
Auto loans remain the backbone of most credit union lending programs, so that seems a logical focus for a refinance campaign.
It’s difficult to compete up-front with captive financers that close loans at the point of sale. But plenty of new-car owners drove off the lot with loan terms your credit union can probably beat. The Raddon Financial Group estimates that less than 40% of car buyers who intend to use 0% financing actually get that rate1.
But will these buyers move their loans? Auto Loan Recapture, a pre-screened direct-mail refinancing program offered through a partnership of CUNA Mutual Group and Ser Technologies, averages more than $5 in interest income for every $1 that credit unions spend on the campaigns2 (as measured one year after the start of each campaign).
Here are five key elements in a successful auto loan refinance campaign:
- A properly pre-screened mailing list: Selecting the proper parameters for pre-screening membership data takes experience. It’s easy to make mistakes—such as not screening out your credit union’s own auto loans—that will cost the credit union money or result in too many non-qualified members receiving letters.
- An incentive: Consumers are bombarded with auto loan offers with impressive-looking interest rates. Consider making your offer stand out by offering consumers something useful: a gas card is typical. But the cost of this type of incentive may siphon too much value from the loan, so consider offering favorable terms such as deferring the first payment for 60 or 90 days.
- A strong, professional, legally compliant letter: When creating the marketing piece, try to be objective about your in-house copywriting and design capabilities. The design and packaging need to compete for a busy person’s attention, and the text must make your offer compelling enough to draw a response—these are jobs for experienced direct-marketing pros. Likewise, if you don’t have in-house expertise to make sure the language and terms in your offer comply with regulations, you’ll need a qualified outside consultant.
- Cross-selling skills: The letter itself is a springboard to conversation. Lending staffs must be trained to engage members to learn about the member’s financial situation, and find additional credit union products and services that meet their needs.
- Performance tracking: Each campaign should include a return-on-investment analysis including loans closed for those on the mailing list, the average credit score and loan balance for all respondents, and more. In addition, measure the “halo effect,” that is, all of the products—not just auto loans—acquired by those on the mailing list over the following six months. This gives you an idea how well your staff is cross-selling.
By Stephanie Christensen
Stephanie Christensen is a Loan Generation Marketing Specialist at CUNA Mutual Group. If you have questions about loan marketing solutions, contact her at email@example.com or 800.356.2644, extension 8137.
1The Raddon Report, September 21, 2011, published by the Raddon Financial Group
2Based on CUNA Mutual Group internal research.