alternative data credit


The defi Team Credit Unions, defi INSIGHT, Servicing Systems

loan servicing companies credit union

Credit unions want to offer their members exceptional lending services. That’s tough to do when member expectations rise every year. As more lending technology and lending options become available, credit union members expect a lot from their local branches.


To live up to the challenge, credit unions often need outside help. This is where credit union loan servicing providers step in. These outside companies add capacity and skills that credit unions may lack. But just as customers have very high expectations for their credit unions, credit unions should have equally high standards for the loan servicing providers they partner with. Identifying exactly what you want from your loan servicing provider is the first step to upgrading your lending system.

What Can Loan Servicing Providers Do for Credit Unions? 

Before you consider what you want from a loan servicing provider you should ask yourself why you want to partner with them. What can a loan servicing provider do for your credit union? There’s no simple answer. Different loan servicing providers offer different options. Some specialize in a particular domain like auto lending, while others are end-to-end providers that take care of every aspect of loan origination and management.


Whether you partner with a company that provides one service or many, the goal of any loan servicing partnership is to:


  • Streamline the loan origination and decisioning process;
  • Collect and analyze data to manage risk;
  • Oversee the credit union’s loan portfolio;
  • Contact members directly as needed;
  • Process and schedule payments. 

When credit unions work with loan servicing providers, they no longer have to spend time or resources on these responsibilities. They can concentrate on other tasks or pool their resources into other membership services.


However, modern credit unions often have more specific needs than the ones in the list above. Here are three additional services that many credit unions look for in a loan servicing provider.

Want to find out more about our software and services? Contact our team today.

#1: Comprehensive and Automated Compliance 

One challenge that many credit unions are facing is the growing complexity of lending regulations. Not only do credit unions have to stay compliant with lending rules, but they also have to respect communications and debt collections laws. The Dodd-Frank Act has made it harder for credit unions to offer certain lending services because lending rules are more strict. These rules are important, as they protect your customers. But they can also be difficult to keep up with.


Loan servicing providers help credit unions stay compliant with the ever-growing list of regulations. Credit unions expect loan servicing providers to:


  • Create systems and loan decisioning software to meet the latest compliance standards;
  • Automatically update software as these standards change;
  • Contact members if they miss a payment or need to adjust their payment schedules without violating communications rules;
  • Provide members with secure mobile and web portals to manage payments, ask questions, or apply for refinancing or other additional services;
  • Collect and analyze borrower data securely and fairly;
  • Set up collections schedules according to current regulations;
  • Predict compliance trends to stay ahead of regulations. 

The importance of automation in this system cannot be overstated. Not only does this free up your time and resources, but it also allows the loan servicing provider to expand its own services. You can get more from partnering with one of these companies, as they can dedicate extra time to additional services.

#2: Effective Auto Loan Origination and Portfolio Management 

If your credit union offers auto loans, you need a loan servicing provider that has expertise in this particular industry. That’s because there are many regulations that apply specifically to auto loans. A loan servicing provider should have a plan for staying up to date with these laws and having a system for following through on compliance at every level.


The loan origination process is also unique to auto lending. There are certain types of traditional and alternative credit data that credit unions can use to assess auto loan risk—data that they may not use to make decisions on other types of loans.


For example, credit unions want loan servicing providers to collect and analyze data like: 


  • Current auto loan origination trends; 
  • Collateral valuations; 
  • Vehicle history reports for used car loans;
  • Driving records; 
  • Insurance rates; 
  • Bill payment history; 
  • Employment history and income; and more. 

The more data you collect, the more competitive your auto loans can be without risking your bottom line. Having an experienced auto loan servicing provider is a huge benefit for credit unions, especially small institutions with a limited staff or resources.

#3: Caring Customer Service 

The most important quality all credit unions should seek in a loan servicing provider is dedication to customer care. Customers often choose credit unions over traditional banks because they feel like they’ll get more one-on-one attention with representatives who truly care about their experiences. They don’t want to borrow from institutions that treat them like just another set of numbers in a system. They want to know that you understand their goals. When people take out auto loans or business loans, it’s a major milestone in their lives. Credit unions that acknowledge this important fact are more likely to succeed in the competitive financial market.


So, when credit unions choose a loan servicing provider, they want the provider to treat their customers with the same level of warmth and care that they would. Your customers should not be able to tell where your services end and where the loan servicing provider’s begin.


Look for loan servicing providers that:


  • Have automated and personalized call center options;
  • Train their staff on how to speak with your customers;
  • Answer all of your customers’ inquiries in detail;
  • Speak with customers in a friendly way, even when responding to delinquencies;
  • Work with customers to resolve payment issues;
  • Keep up to date with customer communication preferences. 

Missing loan payments can be a stressful time for your customers and your credit union. A great loan servicing provider knows how to protect your institution without alienating borrowers or making them feel guilty. When borrowers feel positive about the credit union and know that you are on their side, they are more likely to make every effort to pay back their loans on time and even trade with you again in the future.

How to Find a Trustworthy Loan Servicing Provider 

Credit unions want more than just effective loan origination software (LOS) and portfolio management from their loan servicing providers. They want a provider that will treat their customers professionally and make them feel great about their decision to borrow from your credit union.


If you’re considering hiring a third party to handle your loan services, look for a provider that provides all three services above. Even if you don’t currently provide certain types of loans like auto financing, working with a provider that has experience in these areas may still be beneficial. If you choose to expand into these areas later on, you’ll already have a provider you can turn to that will add these services to your system.


Ultimately, the best loan servicing provider for credit unions is one that is flexible and willing to expand alongside your institution. As the financial industry evolves and new technology is introduced, you can rest easy knowing that your loan servicing provider is already a few steps ahead.

Getting Started

defi SOLUTIONS is a loan servicing provider that provides all three of these essential services to credit unions. We have years of experience working closely with credit unions to manage mortgages, auto loans, and business loans. We’re also dedicated to exceptional customer service through our well-trained call center. If you’re ready to work with a loan services provider that truly cares about your customers, contact our team today or register for a demo.


Get in touch with us today and get a demo!


(Visited 391 times, 1 visits today)