This document discusses lifestyle lending, which is a direct lending model where credit unions provide financing for various lifestyle purchases like medical procedures, home improvements, and retail goods. It outlines the benefits of lifestyle lending for credit unions, including generating new loans and members. Lifestyle lending can integrate easily into credit unions' existing lending processes and offers members convenient financing options. It also benefits retailers by providing a new marketing channel and reducing their financing costs. Overall, lifestyle lending allows credit unions to expand their loan portfolios and build new business relationships in their communities.

1. Lifestyle Lending
Credit Union Services and
Products Forum
2012
w w w. r t e f s . c o m

2. Agenda
• The State of Lending Today
• What is Lifestyle Lending
• The Impact of Lifestyle Lending
• Credit Union Benefits

3. The State of Lending Today
• Total Loan Growth
– April 2011 – April 2012: + 2.3%
– 2012 Year to Date: +.1%
• Vehicle Loan Growth
– Positive for the first time since 2005 in both time
frames

4. The State of Lending Today
• Auto Loan Market Share
– January 2012: 17.4%
– Steadily above 17%
– 29% of credit union loan portfolio (by dollars)
– 32% of credit union loan portfolio (by units)

5. The State of Lending Today
• Loan to Asset ratio
– 2000 – 70%
– 2006 – 71%
– 2012 – 59% (forecast by CUNA Mutual Group)

6. The State of Lending Today
• Loan Growth Rate
– 2000 to 2009 - + 5% to 10%
– 2009-2011 – negative
– 2011 – turned positive - +1% to 2%

7. What is available
other than auto loans?
• Mortgage lending
• Increased from 4% to 5% in 2010 to 8+% today
• Student loans – private lenders
• Personal property loans

8. Are we concerned
about the unknown?

9. Is it safer to be part of the herd?

10. Lifestyle Lending

12. What can be Financed?
• Medical
– Cosmetic Surgery
– Dermatology
– Hearing
– Infertility
– Dental
– Veterinarian
– Vision
– Surgery

13. What can be financed?
• Retail
– Heating and A/C
– Pianos
– Hot Tubs
– Home Improvement
– Water Softener
– Furniture
– Pool Tables/Gaming

14. What is Lifestyle Lending (NOT)
• Indirect lending model
Member
Application
Loan Relationship
Credit Data
Auto Dealer Credit Decision Credit Union
Retail Contract
Purchase

15. What is Lifestyle Lending
• Direct lending model
Member
Application Loan Relationship
Credit Union
Application
Retailer Credit Decision Credit Decision
Funding
Funding

16. How it Works
• Credit Union Places link on its website for the
Lifestyle Lending system
• Member accesses credit union website to
locate retailer/provider
• Member reviews deals, discounts & financing
• Member applies for financing (retailer, cu or
online)

17. How it works
• Member and retailer/provider connect for
services/products
• Retailer/provider receives notice of decision
• Retailer/provider finishes loan paperwork and
returns to credit union (digital signatures)

18. Integration in Processes
• Applications
• Credit Decision
• Approval/Denial notice
• Funding
• Billing

19. The Competition

20. The Competition
• Credit Cards
• Charge retailer/provider 6%-12% of Amount
Financed depending on the discount
• Rate increase if a default
• Promotional Programs
– 0% for 6 to 12 months
– 90 day “same as cash”

21. What a credit union can expect?
• Over 12,000 applications submitted
• 718 Average FUNDED Credit Score
• 663 Average APPLICATION Credit Score
• Over $12,000,000 funded
• $3,822 Average Amount Funded
• 13.27% Average Funded Interest Rate
• < 1% Delinquency Rate

22. Benefits to Member
• Easy to locate retailer/provider
• Research tools
– Better Business Bureau link
– Exclusive discounts
– Direct link to retailer/provider site
• Easy online application

23. Benefits to Retailer
• Marketing Channel
• Retailer may target discounts to CU members
• Generate more business
• Reduce financing costs

24. Benefits to Credit Union
• MORE LOANS!!!!!!!
• Forms auto-populated
• Reporting
• Assistance developing retailer/provider
network – first place to look?

25. Benefits to the Credit Union
• 93% are NEW members
• Build Business Services
• Integrate into the community/Brand
Awareness

26. Is it the Unknown?
• Do you make loans today? Yes
• Do you make loans today for personal
property? Yes
• Do you decision loans today? Yes
• Are you seeking new members today? Yes
• Are you seeking business relationships today?
Yes

27. Questions and Answers
Gary Hess
Gary.hess@rtefs.com
320-281-9765