Any financial institution that invests in its indirect lending program understands how difficult it can be to separate itself from the competition. Besides offering the best rates or dealer incentives, the most successful lenders are often the ones that provide the best service. This often means delivering fast and accurate decisions while dealers are trying to close a sale. That’s why it’s important for financial institutions to rely on loan software technology that pushes them forward rather than holding them back.
Here are a few best practices to consider when evaluating if a loan origination system is the right fit for your financial institution's goals and strategies:
- Robust auto-decisioning: In the indirect lending space, it is imperative that you are able to return decisions as quickly as possible. Every second that passes is an opportunity for a competitor to step in and capture business you both want. Your platform must be able to auto-decision and do it well. This means that credit policy adherence and risk-based pricing should allow a large percentage of your decisions to be returned to a dealer in seconds. This allows for the management of higher volumes, improves customer satisfaction, and provides inherent governance in your decisions.
- Dealer portal connectivity such as Dealertrack and RouteOne: If auto-decisioning improves decision turnaround time but the creation of the applications and communications to the dealer are all manual, then your overall turnaround time suffers. Abbreviating that process is a key to success, and the use of established dealer portals like Dealertrack and RouteOne is a must. Your loan origination system should have established interfaces to these providers for application imports/updates, decision and analyst communications, and status tracking. This not only shortens your decision time but allows for quicker funding.
- Unique pricing for each dealer: Part of your automation process around your indirect products needs to include your pricing strategy. Your institution’s loan software should be able to handle risk-based pricing scenarios for the assignment of buy/contract rates, but to do that at a product level alone is not flexible enough. If required, each dealer needs to be able to have unique pricing. While pricing may be uniform across your dealerships, having the ability to reward better partners with better rates needs to be an option. Additionally, and perhaps most importantly, you should evaluate how the system is able to use multiple factors to assign rates. This might include credit scores, LTV, DTI, vehicle mileage, and vehicle age, among others.
Competition in the indirect lending market is getting tougher by the day, so that’s why it’s important that your loan origination system adheres to these and other best practices related to functionality and connectivity.
Our partners at Coastal Credit Union understood this when they chose MeridianLink’s LoansPQ platform for greater indirect lending success. By implementing LoansPQ, Coastal Credit Union increased consumer loan volume by 78 percent, improved pre-approval functionality, and achieved seamless integration of loan origination and account opening by also implementing MeridianLink’s XpressAccounts solution, which runs on the same platform as LoansPQ to deliver even greater efficiencies.
“The admin set-up was also a lot more robust than what we had before,” said Crystal Robinson, Service and Delivery Manager for Consumer Lending at Coastal Credit Union. “There are a lot of criteria such as price adjustments and custom lists in LoansPQ, which were missing in our old system, that allow us to better drive the applications to our customized queues.”
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