Credit Unions.com | October 13, 2008
As many credit unions look at their mortgage, construction and auto loans; many may be looking for a fresh new idea that promotes growth for new membership as well as further establishes the credit union in the local community. Surprisingly, this new way of lending is found at your doctor's office. Lifestyle lending is gaining momentum with credit unions seeking innovation and growth in their loan portfolios. Medical and retail financing has evolved to cover a variety of non-traditional loans that can enhance a member's lifestyle. These loans can be financing for dental, chiropractic, cosmetic, hearing, vision, medical spas and many other procedures, elective surgeries, and uninsured medical expenses. They also cover many big ticket and unique retail services such as furniture, scooters, hot-tubs, mattresses and spas, vehicle conversion kits and so much more. Lifestyle loans are consistent with the origins and philosophy of credit unions - they meet the needs of members at different stages of their lives.
There are many benefits to look at when investigating lifestyle lending. The first is the basic principle of indirect lending. By extending the services of the credit unions to medical and retail providers that members shop in daily, a credit union grows its brand recognition with not only its current members, but advertises to new potential members that the credit union is truly there to offer solutions for their daily lives and not just auto loans or CDs. Secondly, lifestyle lending is a high yield loan product. On average, credit unions charge rates ranging from 10%-17.99% with no reserve or flats paid to the medical or retail providers. Currently, patients are given financing options at their doctors for several credit card companies with high cost to both patient and doctor with harsh penalties and high variable interest rates. Another benefit to the credit union is the potential cross sell to the provider for business lending and encourages doctors to bring their accounts into the credit union.
The Utah credit unions are one such market to look at when viewing Lifestyle Lending's potential. The Utah market is comprised of 12 credit unions and over 200 medical and retail providers in the state, with approximately 20 new providers joining monthly. The University Of Utah Division Of Plastic Surgery's director, Bonnie Canning said, 'What I like best about working with the credit unions is the service my staff, as well as my patients receives. We have offered other financing in the past, but now use the credit unions exclusively. The credit unions have saved us a lot of money and improved our service and quality of financing; it's a win/win for all.'
Bringing the credit unions and providers together is the job of Lifestyle Lending Solutions (www.lifestyleLS.com ). Lifestyle Lending Solutions (LLS) offers a turnkey solution for credit unions nationwide wanting to offer lifestyle lending. LLS provides comprehensive yet easy to use software allowing for online applications for the medical and retail providers.
Lenders utilizing the system use their own underwriting guidelines and policies that are easily plugged into the system for automated underwriting, reporting and funding. Lifestyle lending integrates with most host/core systems making it even easier to train and grow lifestyle lending. A new way of lending is here!
Credit Union Journal | Monday, January 26, 2009
SOUTH JORDAN, Utah-Unsecured loans to pay for elective medical procedures or big-ticket retail items such as Jacuzzis and central air conditioning at the point of purchase could become the next great opportunity for credit unions following in the footsteps of indirect auto loans, some industry experts say.
Just as is the case in other types of lending, Lifestyle Lending Solutions CEO/Founder Kirk Harris sees huge upside for credit unions in the lifestyle lending arena as firms like CapitalOne, GEMoney and Wells Fargo dial back on their books of business.
'This time of the economy has boosted our business,' he said. 'Credit unions are the anchor in this crazy economy.' Indeed, Harris said Lifestyle Lending Solutions, a company that provides turnkey software allowing for online applications at medical offices and retail providers, has seen loan applications skyrocket by 246%, funded loans have increased by 280% and the number of providers has jumped by 161% since June. Lifestyle Lending Solutions's average loan is about $4,800.
Instead of paying exorbitant interest rates that could jump as high as 30% retroactively, credit unions charge between 10% and 12% for A+ credit members, ranging up to 17.99%. Doctors also benefit, as they do not have to pay between 6% and 12% of the cost of a procedure to CUs as they do other lenders.
Pat Simmons, lifestyle lending manager at Mountain America Credit Union, a Lifestyle Lending Solutions partner, said the $2-billion credit union has seen volume spike by 170% in the last three months.
'I don't think that trend will continue but if it stays anywhere near half of that, that will provide an extremely viable program for the credit union,' he added. 'I can't see anything but an upside to it. The most beneficial thing is that you have an opportunity to reach out and touch people that you had no opportunity to get to before. Ninety percent of all of the loans we have made are new members, which gives us an opportunity to cross sell products and create new relationships.'
The market is also constantly evolving, he noted, pointing to the partnerships Lifestyle Lending Solutions, its credit unions and retail providers have made. Though the firm now boasts hot tub and big appliance retailers, the idea of working with retailers in general came from an Ariz. credit union working with a central air provider.
'In Arizona, (air conditioning) is more of a necessity,' Harris said. 'Timing is of the essence, and if your air conditioning broke down, it was $2,000 that (members) needed right away.'
In practice, the loans have not hurt Mountain America's risk management one bit. 'We critically analyze every loan that comes in, and with a year's worth of loans on the books to date we have not had single a delinquent loan,' Simmons said, noting the credit union has hundreds of such loans on its balance sheet.
Harris sees the credit crunch as the perfect time for credit unions to increase their share in lifestyle lending and tear away at the existing culture in this market.
'In the short term we will see a boost in providers on the system and using the system, he said. 'We have a window of 12 to 18 months to really sprint, and use the advantages of credit unions versus (the banks). By the time we start the recovery, (providers) will have now learned a new system, and those providers will be 'converted' to the credit union system.'
Credit Union Journal | Monday, January 26, 2009
MADISON, Wis.-Despite the economic downturn, Filene Research Institute chief Mark Meyer believes lifestyle lending will remain in high demand, especially for medical procedures.
'When you are looking at the elective medical surgeries that are going to improve the quality of one's life (orthodontics, LASIK, gastric bypass) I don't necessarily see consumers lessening their demand for that,' he said. Meyer also believes that credit unions serve to provide their members a chance to achieve their dreams, and many individuals dream about changing their appearance instead of owning a beautiful house or stylish car. 'I don't know that it is the role for the financial institution to play judge on what their dreams should be,' he said. 'Lifestyle lending is getting back to where the member needs you to be,' said Kirk Harris of Lifestyle Lending Solutions.
While Meyer believes lifestyle lending to be merely a solid book of business as opposed to a 'transformational' one, Harris believes there is a massive upside-one that may prove to be even better on the balance sheets than indirect auto loans.
'The problem with auto indirect is that it has moved into a position where the credit unions are making very little money on the spread of interest plus they are paying the dealerships. When all is said and done, a credit union hasn't made much on the auto side,' he said. 'This product, if done right, this will be far more profitable than their auto programs because of the simple nature of a high loan yield on unsecured loans.'
Strong underwriting and good relationships with business providers are key to a successful program and Meyer believes that members are more likely to pay off such loans as opposed to credit cards, because they see true value in what they receive.
