Where Are Loans Falling Off?
January 20, 2012
Credit unions need to analyze and understand their loan pipeline. Many institutions currently look at their approval ratio or a “look-to-book” that tells them the percentage of applications being funded. Both of these measures have value but don’t necessarily provide the full picture.
Ideally, credit unions should be looking at the number of applications, percent of applications approved, percent of applications funded and percent of approved applications funded. Additionally, credit unions should be looking at how those numbers have changed over time to identify trends. Reviewing this information by delivery channel can also be helpful.
Below are just a few questions decision-makers should consider as they analyze the more comprehensive view of their pipeline:
- How have the number of applications and the percentage of approvals and funding changed over time? Why? For example, the credit union may be approving and funding the same ratio of applications as during the boom times of 2005 and 2006, but the number of applications has decreased. As such, they need to look into how to increase applications
- How have credit standards changed? What impact is this having on approvals and denials?
- Besides credit score, why are members not being approved?
- What are the top three reasons approved applications are not funded? These reasons can identify opportunities to increase loans and revenue without having to adjust credit standards to do it
With these answers, credit unions can determine how best to make changes that will increase loans funded and increase revenue.
