Lenders: Are your customers going to the competition?

In the lending business, what irks customers the most? If you extend a customer a line of credit for a couch, what would cause him to visit a competing furniture retailer when he wants to buy dinner table? 

While credit products require a greater level of commitment from borrowers, once those individuals pay off loans, nothing's stopping them from going to another business for future loans, lines of credit or rent-to-own agreements. What lending practices could cause your customers to walk away from future transactions? 

Your loan application process is too complicated 

To be fair, your loan application process may not be that complex. However, chances are many of the people who walk through your door have never obtained any kind of loan, so they don't necessarily know how the program works, much less where they should begin. This lack of knowledge is pretty common among millennials and other people with little to no credit history. 

Long story short: Guide borrowers through the process. Clear up any confusions. PricewaterhouseCoopers, a company specializing in regulatory compliance, conducted a study on what consumers desire from lenders and found that younger, less experienced borrowers want "seamless" lending processes.

If you ever find yourself working with a customer who doesn't seem to understand the basics, go the extra mile and provide further context. For example, suppose you approve a 23-year-old woman for an auto loan. You tell her that she'll need to list your business as the lienholder on the vehicles title and tell the state's motor vehicle department to send the title to your business. If she doesn't understand why, give her a transparent explanation. 

Is your lending process stressful and complicated?Is your lending process stressful and complicated?

Your online application process is impersonal 

Chances are you threw in the towel and finally set up an online application process. Smart move: PwC discovered most applicants preferred applying for loans digitally as opposed to in person. That being said, their general preference for online services doesn't mean they want to avoid communicating with flesh-and-blood human beings. 

According to a survey from Fiserv, 65 percent of borrowers said they want a "personal touch" when applying online. In other words, they want to be able to chat with your loan officers over the phone, via email and even through web chat. This preference makes sense given that applying for a loan is a big financial commitment - it's not like buying a pair of shoes through an e-commerce store. Even if your customers are obtaining credit products online, add that human element to make them feel secure. 

You don't accept alternative credit reports 

Not everybody has traditional credit scores. According to a study from the Consumer Financial Protection Bureau, 45 million U.S. adults are unscorable. These individuals are in a Catch-22 situation: They need credit products to build credit history, but lenders won't grant them loans because loan officers don't have any credit information to reference.

The "credit invisibles" as they're known to the CFPB are starting to take matters into their own hands and obtaining alternative credit reports, which track consumers rent and monthly bill payment habits. Many companies are starting to accept these reports to assess consumers' creditworthiness. In other words, for every credit-invisible consumer you turn away, a business that accepts alternative credit reports gains a customer. 

Want to learn more?