Last November, I headed to the car dealership full of excitement to purchase a new car. When I finally left four hours later, the enthusiasm had dwindled, my hand was cramping, and I had a headache from all the foreign jargon and documents. The people who were assisting me in the process were extremely kind and helpful, but the process itself was pretty unpleasant.
I bet there have been times when both you and your borrowers have felt this way. It can be deflating, but it doesn’t have to be this way. There are things you can do.
So, are you interested in creating a better borrower experience?
Then you’re in the right place.
Because today I’m going to show you eight things you can do to improve the borrowing experience.
Let’s jump into it.
#1. Shorten the application process
One of the first steps in the long borrowing process is collecting all your borrower’s information. You need their income information, account balances, and asset history. And you need them to connect their checking or savings account, so they can receive their money.
That’s a lot of work. But it doesn’t have to be.
Integrations, like those offered by Plaid, provide a quick way to import all financial balances from an applicant using just their name and Social Security number.
It streamlines the whole experience, it helps things move more smoothly, and it will also help you make more informed decisions.
#2. Web-based loan applications
It’s 2019. If you aren’t offering potential borrowers the option of filling out an application online, they’ll choose another lender. People have lots of options when it comes to loans, and the convenience of beginning a loan application online is now just standard.
But there are two parts to web-based experiences.
- Being able to apply for a loan online.
- Having a smooth, enjoyable experience while doing it.
Offering features like chatbots or over-the-phone support is a great way to improve the borrower’s experience. Sometimes applicants have a quick question, so using a chatbot is the best and fastest solution. Other times, there can be some confusion and speaking to a live person over the phone can help clear it up.
Research finds that 97% of online loan applications are abandoned. Make things easy. Give people options.
Which leads up to our next tip.
#3. Multiple payment options
We've covered how being able to apply for a loan online is crucial for a good borrower experience. Another vital key? Offering multiple payment options.
When you offer various options, it gives the borrower the control and convenience they desire. And, in return, makes your business look more professional and trustworthy.
Fun fact: 50% of shoppers will abandon their purchase if their preferred payment method isn’t available.
#4. Establish a clear payment plan
In any situation in life, when everyone is on the same page, things run more smoothly. And when it comes to lending, full disclosure will benefit you and your borrower from the start.
- You should have built-in options to establish what the monthly payment will be based on paying off the loan in 12 months, 18 months, 24 months, or longer.
- Show the applicant how differing interest rates affect the loan payment.
- Do you offer special holiday deferments available for borrowers to skip a payment during the holidays? Make sure to disclose that in the payment plan.
When potential borrowers have a clear plan of action, they’re more likely to stick to it. Make certain your borrower is aware of their options. Reducing stress and building trust is critical. When someone feels their interests are being looked after, they’re more inclined to be a loyal customer.
#5. Electronic Signature
Remember how I mentioned after my four-hour stint at the car dealership that my hand was cramping? It was because I had to physically sign all my paperwork with a pen.
I can only imagine the printing budget for that dealership, as I watched the overworked printer crank out one document after another—each page awaiting my signature.
Electronic signatures help streamline this whole process. The documents are already there and ready to go. Tap or click in designated areas, and your signature gets included in all the right places in the loan agreement.
It saves time, is easier on the hands, saves paper and copier ink, and is better for the environment. That’s what I call a win, win, win.
#6. No judgment zone
In the end, the very best loan experience for a borrower is actually getting the loan. Nobody likes to be told “no,” and they especially don’t like to be told “no” when in the grips of financial distress.
It’s good to remember the Golden Rule: treat others the way you want to be treated. This applies to every aspect of life, even lending.
When someone reaches out to your institution for a loan, it usually means they’re in search of some help. Asking for help can make a person feel very vulnerable and being judged while in a vulnerable position can be a death nail for a lending institution. I can read the Yelp reviews already: “Don’t get a loan from them! They make you feel like pond scum.”
Perhaps credit ratings and a good credit score aren’t all the factors needed to judge someone of their worthiness for a loan approval. Are you looking at other factors that might qualify someone for a loan, such as employment history or payment history? Your institution may want to explore other credit agencies, like FactorTrust, that take a more complete picture of the person to qualify them for a loan.
#7. Funding through ACH
When the loan has been approved, and it’s time to give the borrower their money, ACH funding makes it a breeze. ACH transactions into the applicant’s checking or savings account are probably one of the greatest factors for borrowers since credit cards. They’re secure, convenient, process quickly, and because they’re electronic, easy to track.
But the biggest plus? The money is deposited into their account within days of opening the loan. For a borrower in need of money, it’s a virtual life jacket in their sinking life.
#8. Payment reminders via text
Even after your borrower has received their funds, their experience isn’t complete yet. They still need to pay off their loan.
One thing that can make this part a lot easier? Text reminders about upcoming payments.
Forbes reported that SMS text messages have a 98% open rate, with 90% of those individuals opening them within 3 seconds of receiving them.
Texting your borrower is easy, cheap, quick, and will yield better results than a phone call, letter in the mail, or an email reminder.
I hope you find these tips helpful. They may seem small or simple, but they'll add up to make a big difference.