In Lending, Timing Is Everything
By: Marcy Scanlin and Caroline Vahrenkamp
With 46 percent of consumers anticipating applying for a loan this year, it’s more important than ever to get your share of the market before it cools. In lending, timing is everything: Knowing who is in the market for what NOW is how financial institutions gain, preserve and recapture the share that is increasingly going to the largest banks and virtual lenders.
To be in the right place at the right time with the right offer, your lending department needs to know:
- Who is in the market?
- What do they want?
- Do they meet our criteria?
- Where are they applying?
- How fast can we get our offer out?
Constantly monitoring your consumer base and/or your market for real estate, auto, credit card and personal loan applications is the best way to identify which qualified borrowers are jumping on some of the most attractive rates in years.
In using your financial institution’s specific credit criteria to qualify borrowers, lenders don’t have to sort through leads to find consumers with the need and the creditworthiness to match your offer. When someone applies for a loan and they meet your credit criteria, a trigger is sent to your institution and your lenders will then issue a firm offer of credit. The trigger can come in daily or on a less frequent cadence if the lending department prefers.
By monitoring who is applying at all three credit bureaus, financial institutions can realize a 10 percent lift over single-bureau match rates, and a 10 percent increase over two-bureau match rates, according to a recent blog post by Deluxe, a Raddon partner.
With so many alternative lenders and with the dominance of big banks, many of your competitors don’t have a physical presence in your market, but they certainly have a virtual presence. That is why it is increasingly important to monitor all three credit bureaus so you can catch all the new activity and get in front of the consumer with your offer while they are still active shoppers.
When the pandemic hit, U.S. households had the lowest debt levels since the 1990s. This increased ability to borrow was further fueled by dwindling opportunities to spend income on travel, dining and other leisure activities. In some states, shutdowns impacted car dealerships, retail outlets and real estate firms. All this led to pent-up demand and higher savings levels as borrowing rates dropped.
Demographics also play a huge role in lending demand, driven by desire or need. As rates dopped, younger millennials began taking the opportunity to get their first homes, while older millennials either refinanced or moved to larger homes to accommodate growing families and home offices. Gen X and even baby boomers added fuel to the hot lending market.
According to the Raddon Research Insights study, If You Build It, They Will Borrow, millennials reported the highest need for loans at 71 percent, up 30 percent from two years ago, and up 50 percent from five years ago. Gen Xers and boomers reported more than double anticipation of their loan needs than in 2018.
This research also shows that demand is up year-over-year in all loan categories, with the highest demand for credit cards at 20 percent. Almost four in 10 millennials expressed a demand for credit cards.
The other side of this coin is that many consumers – either through lack of spending opportunity or through fear of job loss – saved their stimulus money and added to high deposit balances at most institutions. By seeing opportunities through daily credit triggers and offering credit while the borrower is in the market, you can build your lending portfolio at a pace in line with the market and ultimately strengthen your loan-to-deposit ratio.
Knowing when your borrowers are in the market, whether they are qualified, and what they want is how savvy financial institutions arm their lenders to target the best prospects before they get away.