Auto loan servicers are well aware that delinquencies in subprime auto loans have been increasing this year. According to Fitch Ratings, auto loan delinquencies of at least 60 days for subprime loans were up 13% month over month for July of this year (this rate is 17% higher from the same period a year ago). Additionally, July 2016 saw 21% more prime auto loan delinquencies than it did July 2015.
"Increased losses are emanating from weaker collateral pools in the 2013-2015 transactions, which have weaker credit quality including lower FICO scores, higher amounts of extended term loans (over 60 months) and higher LTVs [loan to value ratios]," wrote a Fitch Ratings Analyst.
Add the number of increasing delinquent auto loans to the cost of ever-changing regulatory standards and operational expenses, and it's no wonder auto loan servicers are concerned about their profit margins. However, there are ways to offset these costs through carefully placed and delivered messaging on all borrower-facing communications. Here are some small changes you can implement that can make a big impact:
1. Add color to your documents. We don't just mean a colored logo! A well-placed call-to-action in bright colors can do wonders in getting your borrowers' attention and influencing them to make their auto loan payments a top priority.
A good color scheme will have a significant impact on your digital and print document marketing response rates. This is proven to be true by a recent study conducted by the secretariat of the Seoul International Color Expo, which determined that 92.6% of those surveyed stressed the importance of visuals when purchasing products and 84.7% believe that color accounts for more than half of the various factors important to consumers when choosing which products they purchase. If you want to effectively engage with your borrowers, make sure your documents are in full color.
2. Go digital. Create a unique and memorable borrower experience by providing applications that allow for easy online and mobile payments, as well as offering opt-in push notifications and SMS alerts. According to Creditcards.com, 19% of Americans use online bill pay, and 3% pay by text message. As time marches on, these numbers will only go up! Offering these services gives borrowers multiple ways to engage and make payments.
3. Utilize dynamic messaging. Dynamic Messaging allows you to present strategic messaging to all borrowers or a specific target group and use consumer-facing marketing space by targeting borrowers with products and services that best fit their needs. There are many ways to incorporate dynamic communications on specific customer criteria, including account balance, zip code, gender, or marital status, to name a few. You don’t have to reinvent the wheel in compiling data because you already have it. Why not use it to increase your bottom line?
4. Capitalize on affiliate marketing. Form partnerships with outside businesses to provide advertising space right inside your transactional documents. This is an appealing opportunity to prospective advertisers because personalized borrower communications tend to have much higher open, view and read rates than most mail and emails.
Wrapping it Up
Borrower-facing documents are the perfect delivery method for your auto loan portfolio initiatives. By adding color, going digital, utilizing dynamic messaging, and capitalizing on affiliate marketing, you will experience overall profit margin improvements.
Interested in learning more about how Lanvera's solutions can help you net more profit per loan? Click here to contact us today!
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