Credit unions often provide a diverse range of loans to cater to the unique needs of their members. However, by strategically utilizing specific loan types, credit unions can experience accelerated growth.
Therefore, if you want to continue to grow your credit union and expand in terms of critical metrics like return on assets, there are a few loan types in particular to leverage.
Indirect Auto Loans
In order to grow, your credit union should be trying to not only generate more loans but have more loans per member and higher loan-to-share and loan-to-asset ratios as well. Auto lending is one way to do it.
Indirect auto loans are high-payoff lending products that help drive earnings for credit unions. Their demand is also generally linked to favorable economic conditions. When the economy is doing well, more people are willing to buy a new car--hence an uptick in indirect auto loans.
First Mortgage Real Estate Loans
Increase revenue while making a community impact with first mortgage loans. These loans contribute to growth by building member loyalty and long-term relationships.
First mortgage loans can generate interest income for your credit union. This interest income can contribute significantly to your overall revenue, providing a steady and reliable income stream.
Maximize the potential of first mortgage real estate loans by effectively mitigating risks through responsible lending practices. Enhance borrower relationships by prioritizing clear and open communication, transparent loan terms, and exceptional member support.
HELOCs
A HELOC is a great opportunity for credit union growth because of an increase in "tappable equity." This is the amount of equity that a member could theoretically borrow against using this type of loan, which has been increasing. Most lenders only allow people to tap into roughly 80% of their equity at a given time.
Some experts anticipate that HELOC originations will grow an enormous 24% by the end of 2023. This is due in part to the tappable equity that people can draw from, plus a desire of many to use home equity to pay down other debts they have that carry higher interest rates.
Personal Loans
Finally, we arrive at personal loans--a type that have a slow-but-steady growth rate that can absolutely become a part of your larger scalability strategy.
According to one recent study, total unsecured personal loan balances increased 26.3% in the first quarter of 2023 compared to just one year prior. The number of those loans also increased by 12.6%. Naturally, you should work to diversify the loan types you're using to trigger growth for your own credit union. Although other loan types may have faster growth rates, the stability of personal loans is what will serve you over the long-term.
The Power of Digital Lending
As your organization works to unlock this newfound level of growth, you should also be aware of the fact that digital lending and especially online applications can reduce loan application abandonment significantly. This is important, as one study indicated that 68% of consumers abandoned an application in the last year alone.
To fully embrace the benefits of digital lending, FLEX is here to support you every step of the way. That's why we've created an insightful eGuide that dives deeper into the advantages digital lending can bring to your organization. Begin your journey by clicking the button below for your copy today.
