Indirect lending. Whether you’re a dealership in the auto, RV, marine, and powersport industries, a credit union looking to get into credit union indirect lending, or a bank looking to expand your loan portfolio, this lending method can enhance your core offerings. Fueled by customer desires for speed and efficiency when making larger purchases, indirect lending has become a competitive industry for all parties in recent years.
So, how does it benefit dealers and lenders? In this blog, we’ll break down what indirect lending is and discuss the key benefits it provides.
What Is Indirect Lending?
Before we go into the benefits, let’s first introduce indirect lending. This style of lending refers to one in which a third party, such as a dealership or partner like Web Finance Direct, offers loans to consumers on behalf of banks and credit unions.
For customers, indirect loans typically provide a higher level of flexibility, as they can choose from a number of different banks and credit unions to get the best rates. For lenders, like credit unions and banks, this method provides an avenue to grow their loan portfolio without the direct interface with the end customer, while dealers benefit by offering competitive financing options, enhancing their sales appeal.
Benefits For Dealers
1. Indirect Lending Shrinks Overhead Costs
Indirect lending lets dealerships keep their costs low while still offering the same services that their larger competitors can afford. By outsourcing full finance and insurance (or full F&I) services, auto and recreational dealers enjoy all the benefits of an in-house F&I department without the overhead associated with it.
Plus, your dealership can more readily offer backend products through an indirect lending partnership, including gap insurance and extended warranties, boosting your overall profit margins in the long term.
2. You Can Provide Better Customer Service
Indirect lending with credit unions and banks takes the weight of offering loans off your team’s plate, letting you focus on what you do best: running your dealership.
Indirect loans also give your customers the ability to finance their purchases without having to leave the dealership, potentially reducing a lot of the stress associated with buying a car, boat, RV, or powersport vehicle.
3. Indirect Lending Lets You Offer Better Rates
On the topic of being able to help more customers, working with an indirect lending partner can help you offer better rates that fit your customer’s unique needs. In some cases, indirect lending can be a better option than going directly to the bank or credit union for a loan.
4. You Can Connect With More Borrowers
While indirect lending companies can offer better rates, they can also give you more options when handling customers with poor or no credit. Because of the volume of lenders they work with, indirect financing partners like Web Finance Direct may work with lenders who offer subprime and indirect loan packages.
Benefits For Banks and Credit Unions
5. Indirect Lending Streamlines Communication
The benefits of indirect lending for credit unions and other lenders start with simplified communication. A lender’s indirect lending partner acts as the facilitator, ensuring that the process is as smooth as possible.
6. Membership Scalability
While dealers enjoy the benefit of offering more loans to customers, credit unions and banks then have more opportunities to connect with dealerships and, more importantly, potential new members. Not only can you increase your loan volume, but following up with buyers who use loans through your credit union can evolve into new members and account holders who might seek further services.
7. Indirect Lending Can Grow Your Loan Portfolio
Indirect lending can give your credit union or bank more flexibility in what kinds of loans it offers. For instance, you might not have the staff or expertise to handle loans for RVs or manufactured homes. By partnering with Web Finance Direct, you could begin offering indirect loans to more borrowers in a wider range of industries.
8. Indirect Lending Supports Community Outreach
Finally, indirect lending can help support your credit union’s community outreach efforts. Take Triad Financial Services’ example:
“In an effort to expand community outreach, credit unions have successfully widened their range of products and services over the past few years. That is due to a combination of factors, including interest rates that continue to hover around low levels and technology advances that allow credit unions to compete with “traditional, for-profit banks” in terms of both product and service offerings. One essential factor is that increasing numbers of credit unions are realizing that community outreach programs deliver far-reaching benefits for all those involved.“
Especially if your credit union is small with big dreams in supporting its community, a credit union indirect lending program can help propel those dreams — and your union with them.
Indirect lending with a partner like Web Finance Direct means no extra work but exposure to qualified dealers and applicants. It’s the way to future-proof your business. Contact our team to learn more about joining our network of highly qualified dealers and lenders.
FAQs
Is Indirect Lending Suitable for Both Large and Small Dealerships?
Yes. Providing indirect loans is a great way for both small and large dealerships to expand their services.
How Do Banks and Credit Unions Benefit from Indirect Lending Partnerships?
Lenders benefit from indirect lending in a number of ways, including expanding their loan portfolios and streamlining communication with dealerships.
How Do I Become a Qualified Dealer for Credit Union Indirect Lending Programs?
Web Finance Direct uses CLEAR reporting to vet our network of dealerships. This ensures our dealers meet strict quality standards, including proof of revenue.
What is the difference between indirect and direct lending?
Direct lending involves a borrower going directly to their lender for a loan, while indirect lending allows borrowers to connect with lenders through a third party, such as a dealership or indirect lending partner like Web Finance Direct.
What is credit union indirect lending?
In credit union indirect lending, credit unions partner with third parties such as Web Fiance Direct to offer loans to more borrowers through dealerships.