As technology evolves and new industry players emerge, it has never been easier for customers to search for the best deal on the market and apply for a loan in minutes. Plus, the current challenges of slowed loan demand, record-high interest rates and increased online lender competition have only intensified the need for banks to prioritize loan retention.
To prevent borrowers from rate shopping, community institutions must provide personalized service and meaningful relationships but also focus on modernizing and streamlining processes to remove barriers to renewal. In the current environment, where loan acquisition is more difficult, banks can’t afford to lose the customers and loans they already have. Here are three best practices for community institutions to help maintain a high loan renewal rate:
Digitize the loan renewal process
Many community institutions still rely on outdated processes that require customers to print, scan and manually fill out forms. This is not only a time-consuming and frustrating task, but it is typically made worse by the bank requesting documents they already have, like financials, tax returns and rent rolls. Constant repetition not only wastes borrowers’ time but also communicates a lack of understanding and familiarity with who they are and their needs, leading to customer turnover.
By strategically leveraging technology, institutions can simplify, digitize and automate the renewal process to boost operational efficiencies and customer loyalty. This includes using automated workflows to alert borrowers of the application timeline, offering an intuitive online application for them to apply for a renewal on their own and providing secure document upload capabilities so they’re not required to visit the branch.
Embracing modern technology not only enhances the borrower experience, increasing retention but simplifies the lender experience, saving them time and energy to focus on building customer loyalty and trust. It’s a win-win for both the lender and borrower.
Offer relevant products to boost stickiness
A borrower is far less likely to take their loans elsewhere if they are using multiple products at an institution. This is why effective cross-selling can have a significant impact on loan renewals. However, the shift from in-branch conversations to online interactions has made cross-selling more difficult.
Through leveraging technology to gain deeper insights into customer relationships, banks can more accurately offer the right products and services at the right time, even digitally, helping create stickier relationships. For example, sophisticated relationship aggregation tools can provide a comprehensive view of customers, allowing institutions to proactively identify customer needs and provide personalized loan offers. Modern technology can provide lenders with both the time and transparency to address customer needs, increasing stickiness.
Personalize customer relationships with frequent communication
In addition to delivering transactional convenience, it is still crucial to prioritize forming meaningful connections. Personal relationships and exceptional service are the foundation of community banking and can make or break the renewal decision. This is another area where technology can help; holistic portfolio management and reporting tools can alert lenders when it’s time to proactively reach out to their borrowers. Initiating frequent check-ins and engagement demonstrates that borrowers aren’t just another number and that the bank cares.
As community institutions navigate an increasingly competitive environment, taking proactive steps like digitizing the renewal process, forming stickier relationships through relevant product offerings and maintaining open communication can solidify customer loyalty, reduce churn and positively contribute to the institution’s bottom line. By embracing technology and prioritizing customer-centric practices, community institutions can enhance their ability to retain loans and deepen customer relationships.