Established auto lenders have weathered several instances of market turbulence over the decades. The pandemic is yet one more storm and lenders are continuing to anticipate how it will play out. Will business ever return to the way things were? Or is a new normal inevitable? And will it be characterized by continued economic uncertainty and a significantly increased level of digital transactions?
Time to Reassess Your Lease or Loan Servicing Strategy?
In recent months, changing federal and state guidelines have challenged lenders’ abilities to accommodate and comply. Taking advantage of forbearance options, consumers have overwhelmed many lenders with car lease or loan modification requests. Economic uncertainty points to continuing requests for car lease or loan modifications as borrowers’ financial positions change.
For many lenders, the challenges of managing the volume and variety of car lease or loan modification requests have revealed inefficiencies caused by deficiencies in their servicing abilities, such as outdated software, minimal flexibility, and the inability to quickly modify processes.
In the current economic climate, lenders are looking for more effective ways to handle car lease or loan modifications.
The Complexity of Car Lease or Loan Modifications
Car lease or loan modification options are intended to help both borrowers and lenders survive the economic roller coasters. Remedies are guided by the CARES Act in conjunction with the lender’s own experience and strategy. Modifications may include:
- Waiving fees or penalties during the forbearance period.
- Deferring monthly payments, with an agreement to repay principal and interest at a later date.
- Requiring interest-only payments, with the understanding that payments will eventually increase or missed principal payments will be due at the end of the lease or loan term.
- Reducing the interest rate, temporarily, then reinstating or adjusting the rate and payments to meet contractual obligations.
- Extending the lease or loan maturity date to provide lower payments.
The financial hardship experienced by each borrower can vary greatly. The time required to understand the specific need, determine the appropriate car lease or loan modification, and effect the changes can demand a substantial amount of servicing agent time. Inflexible lease or loan servicing software with limited automation features can further protract the car lease or loan modification process.
Lenders having difficulty managing the volume and variety of requests may be tempted to hire additional full- or part-time staff, especially as the demand for car lease or loan modifications increases. While that may be a short-term solution, there’s a better long-term option; one that not only helps meet the immediate demand, but also accommodates cyclic trends and future economic shocks.
Work With an Experienced Lease or Loan Servicing Provider
Working with an experienced lease or loan servicing provider offers the greatest flexibility in handling the volume and variety of car lease or loan modification requests. An experienced lease or loan servicing provider has knowledgeable staff and technology-enabled processes to offer a comprehensive range of services. To bring a greater level of efficiency and a higher level of service to all aspects of loan servicing, your lease or loan servicing provider be able to:
- Scale resources to handle as little, or as much, of your servicing workload.
- Support multichannel communication with borrowers, including phone, email, text, chat, and traditional postal mail.
- Employ experienced, multilingual staff to handle the full spectrum of loan servicing requests.
- Allow borrowers to manage payments, update contact information, and check statements 24/7/365 via a mobile lease or loan servicing application.
- Incorporate extensive automation capabilities to efficiently manage all phases of lease or loan servicing and provide real-time portfolio updates via a scalable lease or loan servicing system.
- Manage accounting and cash flow, including back-office payment processing.
- Comply with current federal, state, and local regulations.
Although the intention of car lease or loan modifications is to find a way to avoid delinquencies and defaults, the economic climate points to an increasing number of defaults. This is another instance where an experienced lease or loan servicing provider can step in and handle all aspects of the process—collections, recovery, and repossession—in the most professional and efficient manner.
Tailor Lease or Loan Services to Meet Your Specific Needs
Your lease or loan servicing provider should offer you a range of options that provide you with flexibility in determining how you delegate the responsibilities associated with lease or loan servicing. For example, you may want to outsource lease or loan servicing activities unrelated to lease or loan modifications, thereby freeing up a greater number of your servicing staff to focus on car lease or loan modifications. Alternatively, you might have the lease or loan servicing provider proactively contact all borrowers who have missed payments but have not yet requested car lease or loan modifications.
Working with a lease or loan servicing provider who offers a comprehensive set of services allows you to focus your efforts on activities that need immediate attention, accommodate financial needs, and reduce risk for both you and your borrowers.
defi SOLUTIONS provides configurable lease or loan management systems, analytics and reporting, and a wide range of technology-enabled lending services. If you’re struggling to accommodate the increasing demand for car lease or loan modifications, contact our team today or register for a demo to discover the benefits of working with an experienced lease or loan servicing provider.