We Have a Loan for That!

Lifestyle loans, sometimes known as retail or merchant lending, are now part of the mix for many credit unions and another way to meet member needs.

A boon to your bottom line, lifestyle lending done right can develop a more diverse, higher yielding loan portfolio. It can also serve as a new account acquisition strategy; improve your member service; create greater loan awareness among staff and members; and be a tool to create cultural change.

Understanding Member Needs

“Most of us in credit unions love having the ability and freedom to help people,” says Courtney Prost, marketing/communications director for $60 million/9,800-member Community Star Credit Union, Elyria, Ohio. “That’s the driving force behind our lifestyle lending program.”

Launched in 2012 the program is designed to meet any need that can improve the lives of the CU’s members. Loans can be for a boat or RV, medical bills, a wedding or funeral, home electronics, a new furnace or dream vacation. The CU markets the program extensively but not as an indirect product.

“Lifestyle loans are simply another resource for our loan officers,” explains Prost. “They’re not for any one item or a specific term. It’s the branding that has given our loan officers a broader approach to meet member needs and an affirmative way to ask, ‘What can we do for you?’”

CommStar CU adapts the marketing for its lifestyle loans seasonally. “The program is featured prominently on our website and billboard near our corporate office,” says Prost. The CU’s Western-themed ‘Loan Some Dough’ promotion (Fall 2014) generated $2,956,662 in lifestyle loans over a three-month period. This figure was an increase of $534,815 compared to the same timeframe the previous year. “We had Western dress-down days for staff and decked out our lobbies with Western gear and hay bales,” adds Prost. “We also incented staff for loan referrals.”

The lifestyle loans are typically signature loans. “We’ve just created a more relatable or relevant way to package and promote it to members. It’s all about relating to those you serve,” notes Prost.

Why Offer Lifestyle Loans?

For CommStar CU, the rationale began during a casual brainstorming session between Prost and her CEO. The challenge, “We can do loans for anything; why aren’t we doing them?” From the session, parameters for lifestyle lending emerged as did the slogan, “We have a loan for that!” “It’s much more appealing when a credit union can connect with its members vs. offering a ‘laundry list’ of loan products,” adds Prost. 

CUES member Kari Endres, VP/marketing for $200 million/28,000-member NuMark Credit Union, Joliet, Ill., is also a proponent. “We market lifestyle loans specifically as the loans our members wouldn’t normally think we do,” says Endres.

NuMark CU launched its lifestyle lending program in the fall of 2014. The goal was to widen the net for loans—to help members with everyday needs like pet bills, adoption and braces.

Endres also describes lifestyle lending as an added dimension in the CU’s loan portfolio and another “tool” in the loan officer’s tool belt. Not currently offering the loans indirectly, the CU is considering expanding the program to area merchants via an automated program.

Paula Kenny, SVP/lending and training for $6.5 billion/685,000-member America First Credit Union, Riverdale, Utah, concurs. “Lifestyle lending can and should be used as a way to make a difference in your members’ lives.” Her CU has an overall indirect loan portfolio of more than $1.3 billion which includes both auto and lifestyle loans. It incorporates lifestyle lending as a member service, for balanced loan growth, and new account acquisition.

The program, offered since 2006, is available point-of-sale through 22 merchant outlets. The loans are wide-ranging, from Lasik eye surgery to hot tubs and pianos. “We offer automated lending through the merchant; it’s easy for the provider while convenient and turnkey for members,” explains Kenny. As a new account acquisition strategy, the CU gains about 450 new members per month from all of its indirect lending channels.

Kenny also prefers lifestyle lending as an alternative to more expensive credit card debt. In her 30 years of lending, she’s seen far too many individuals get overwhelmed by credit cards. “In contrast, the lifestyle loan has a set term­—a maximum of 60 months–so there is always light at the end of the tunnel,” she says.

Terms vary by need, and the CU determines the rate based on the member’s credit score performance.

Marketing vs. Organic Growth

For CUs like NuMark and CommStar, it’s the branding that has made lifestyle lending stand out. For America First CU, it’s merchant automation and member demand. Other CUs drive growth by encouraging staff to use the loan as an upsell product or by assimilating the loan into its business services offerings. 

NuMark CU has been successful marketing its program heavily on the Web as a special lifestyle loan package. It is designed to meet a member’s bucket list, honey-do list, or any other item or “to do.”

Members can apply online after perusing a list of about 35 options. The CU also has a brochure devoted to the program, which carries the same theme through to community events. Radio has been the primary advertising channel.

Endres believes the product works particularly well in between the CU’s major loan campaigns, like rate-driven auto or home equity promotions. “It’s a way for us to take a more consultative approach with our members,” she adds. “This ensures you remain as the member’s trusted financial advisor.”

Growth of America First CU’s lifestyle loan portfolio has been significant, achieved organically via word-of-mouth and merchant referrals. “We’ve done little to promote the loans through formulated marketing campaigns,” offers Kenny. “Member demand was already there. It was up to us to meet that demand as merchants became more interested in the program.” These factors have driven program momentum, along with excellent member service.

Tag Team With Business Services

For $685 million/91,000-member Cyprus Credit Union, Salt Lake City, lifestyle lending is more than a program to meet member needs. The CU tag teams it with business services for a stronger, more personal sales approach and a broader merchant referral network.

“It’s a service we use to both increase loans and enhance business member relationships,” says Indirect Lending Manager Jenny Hughes. Like America First CU, Cyprus CU incorporates an indirect automated lending approach with merchants for seamless point-of-sale lending opportunities.

Both departments—indirect lending and business services—regularly visit merchants. “We find that by working together, we get a lot of ground covered and complement each other’s efforts,” says Hughes. Cyprus CU has also been using an indirect automated lending portal, CU Direct’s OnSpot, for 18 months.

Since implementation, the portfolio has skyrocketed:

• 2013 – Lifestyle Loans Funded: $92,400
• 2014 – Lifestyle Loans Funded: $454,733
• 2015 – Goal: $1 million

By cultivating the merchant relationship, Cyprus CU has gained tremendous growth in a short period.

“We offer a lot of face-to-face time. Our indirect loan officer and business development officer make sales calls together at least two full days per week, visiting five to 10 merchants through appointments and cold calls. Our goal is to enroll eight to ten merchants this year,” adds Hughes.

“For newly enrolled merchants, we bring treats to the office and give presentations to staff to explain the program. We always stay in touch with the merchant after implementation to deepen the relationship,” she adds.

The CU also intentionally designed the program so that it is not dependent on seasonal products. It targets an assortment of merchants including roofing companies, heating and air conditioning, music companies, spas and pools, and those in the medical industry.

The Case to Automate

CU Direct’s OnSpot Financing, based in Ontario, Calif., is an automated lending solution connecting retailers or medical providers to CU members for point-of-sale credit union financing.

“OnSpot enables a credit union to offer financing at virtually any merchant outlet,” says Senior Product Manager Michael Hartley. “Service providers, store retailers or even in-home retailers can submit a loan application for the member electronically, using a secure Web-based portal.” OnSpot has been available for two years, with 22 CUs participating; it’s part of CUES Supplier member CU Direct, the nation’s largest indirect lending platform.

OnSpot is compatible with tablet mobile devices, making loans easy at a merchant or medical provider’s office or for sales staff visiting a member’s home. This automation has been particularly important to the success of Cyprus CU’s “boots on the ground” sales strategy.

“We have about 50 merchants signed up with our OnSpot program since launching it in late 2013,” elaborates Hughes. “The loans are unsecured and done mostly for home improvements, lifestyle enhancements, and medical or other personal needs. Members can search for a provider and apply for the loan right on our website.” All inquiries go to the indirect lending department.

“We strive to reply within five to 10 minutes. Timeliness is key, especially with this type of an indirect loan.” Hughes explains that providers often recommend a lender they’re most comfortable with, or the person may opt to go with the lowest rate or quickest decision. “Different from indirect auto loans, the merchants don’t tend to be credit savvy. They simply want to offer the customer a convenience. If you can’t provide quick, reliable service, the merchant will steer the customer elsewhere.”

CUs can establish automated decision parameters within OnSpot. These parameters can make automated approvals faster for members who meet certain criteria. “When you can automate the decision and fulfill the request on the spot, success is more likely,” adds Hartley. “Like meeting any consumer demand, it’s imperative the decision be quick and not reactionary.”

Why the Buzz?

Hartley strongly encourages CU clients to integrate the OnSpot lending portal right into their websites similar to what Cyprus CU has done. “It makes it simple for the member to apply and keeps the loan with you.” OnSpot also provides training and marketing support, including merchant demos and PowerPoint presentations. 

“There’s a lot of buzz about lifestyle lending right now,” continues Hartley. “First, credit unions are always looking for ways to diversify their portfolios, rather than simply having a heavy concentration in indirect auto loans or mortgages.” Regulators also love to see another portfolio line, with a healthy balance between secured, unsecured and real estate loan categories.

“Secondly, lifestyle loans can introduce potential new members to the credit union or fill a niche for existing members,” says Hartley. “Compared to other lenders who’ve been in the business for years (such as GE and Wells Fargo), members can access a more economical, fairly priced loan from their credit union. And people always need financing—whether it’s for braces, veterinary services, home improvements or cosmetic surgery. There’s a big demand and a wide-range of opportunity.”

Like Cyprus CU, a number of OnSpot clients use lifestyle loans as a means to create a hybrid relationship with current business members.

“It all becomes part of the strategy mix; lifestyle loans drive loan volume and build new partnerships with potential business members and merchants,” offers Hartley. “Lifestyle lending can enhance a credit union’s community relations and PR strategy as well.”

CommStar CU has done just that by regularly intertwining its lifestyle lending program with community events. “We’re extremely involved in our community,” elaborates Prost. “We attend chamber events, volunteer for local nonprofits, do business expos; anything that’s community-related, we’re there. Lifestyle loans are the perfect sales tool when we’re out on the road talking up our services. What better way is there to promote lifestyle lending than when you’re out being visible, serving the community?”

Ensuring Success

It’s vital for a CU to obtain data on member behavior and loan trends before launching a lifestyle lending program, as well as to explore member needs. After you conduct your research, it’s equally important to have an appropriate level of trained staff ready to handle the loan volume.

“Especially if you take the indirect route,” says Kenny, “having adequate staff will ensure you can give answers quickly, which is a requisite for all indirect loans nowadays.” She likes the automated lending tools, like OnSpot (which America First CU also uses) to make the process seamless. “But you still need the appropriate level of staff to ensure success and that members get their loans.”

Hartley adds that having a dedicated employee to lead the lifestyle lending program and cultivate merchant relationships is essential. “Just like indirect auto loans, having a staff person pay attention to the merchant with occasional visits and calls impacts demand.” Volume depends on a merchant sending the CU the business. “Those who get the business are the ones who look for it.” Like any balanced marketing strategy, Hartley suggests marketing it from both angles: the business side (via merchant relationships) and consumer side (marketing to members).

For a CU considering lifestyle lending, Endres recommends not to place limits on the product or to structure the loan around term or rate. “The whole purpose is to start a conversation. If you build the loan around the term, that’s where the conversation will stay—around the rate, term, and so on.”

The discussion should stay focused on member needs to keep the conversation meaningful. Endres explains that, ultimately, there is a variety of loan types that can serve a member’s needs. “It’s up to the loan officer to find the solution that best serves the member. It’s this consultative approach that members not only appreciate but that will help grow the portfolio.”

Don’t Forget Training

NuMark CU focused heavily on staff training before launching its lifestyle loan strategy. “We started with an all-staff meeting via mini-conference calls introducing the lifestyle loan package,” says Endres. “Our trainer then provided an assignment that varied by position; it included a scenario for each employee to complete: ‘How would you handle this?’”

Staff was given six weeks to absorb the material and use the scenarios as part of their branch or departmental training. “We reconvened and brought our assignments to the next all-staff meeting,” continues Endres. “Staff had fun acting out scenarios and the training process worked well, just as we had hoped.”

Endres shares her favorite: “Two of our staff posed as Mr. and Mrs. Jay Cutler. The couple had come in looking to consolidate some debt. Throughout the conversation, they also wanted to get some cosmetic surgery done, plan a wedding and build a patio. The FSR offered several loan options all under the umbrella of a lifestyle loan. The message was ‘Yes, we have a loan for that!’”

Hughes adds that at Cyprus CU, “We visited every branch before launching OnSpot, met with branch managers, and did significant staff communication. The last thing we wanted was to catch staff unawares or be unsure on how to direct inquiries.”

Prost concurs. “It was all about helping the member for us. True, lifestyle loans improve our bottom line and meet overall loan goals. But we also used the process to retrain staff, so they understood they didn’t need to push a product or sell something the member didn’t want. Instead, lifestyle loans are built around member needs. Repackaging the program and how we present the loan has made all the difference.”

She adds that part of the training should always include front-line staff, so they know how to answer questions and pass members to the appropriate team member. “It streamlines the process and keeps service levels high.” 

Changing Staff Culture

Only when staff fully embrace the concept will lifestyle lending be ready to flourish. Most CUs expect the loans to be popular. The bigger surprise may be how much staff appreciates a revitalized focus on member needs, and the empowerment to approve the loans—even though the loans (most likely) were already available. “You cannot discount the value staff adds to the program. Saving members money always makes staff happy,” adds Hughes.

Kenny believes lifestyle loans will only get bigger and become more impactful in members’ lives and beneficial to a CU’s bottom line. “Why not let us be the one to fill that need rather than the finance companies?” she asks. “We can offer savings, better service, with lower rates and more reasonable terms.”

By understanding member needs, staff can naturally open the door to a deeper conversation, creating stronger member relationships and increased loan growth. Lifestyle lending, when done right, might also give the required edge for a CU to stay a step ahead in today’s competitive lending environment.

With 25 years of marketing and communications experience, Stephanie Schwenn Sebring established and managed the marketing departments for three CUs. As owner of Fab Prose & Professional Writing, her current focus is on assisting CUs and industry suppliers with their communications needs.