Repossession, and how to avoid it
The real challenge in automotive finance is not so much giving a vehicle to a stranger, but getting that stranger to pay you back later. Unfortunately, many platforms are frontloaded with origination tools but offer minimal support during servicing and collections. LoanPro, however, is built to make servicing easy, efficient, and scalable. Most of our features, like automations and Interactive SMS, are relevant to any credit provider.
Here, we’ll focus on a few that cater to the specific needs of the automotive industry:
- Collateral tracking. LoanPro natively supports tracking tools for the vehicles securing your accounts. For us, this is a table-stakes feature that should be essential for any automotive lending platform, but many legacy solutions and even newer platforms are missing this basic functionality. With LoanPro, you can easily create any number of collateral items and save them to an account. When you communicate with borrowers, your custom templates can merge in that collateral data, giving you personalized messages that contain specific information about the borrower, account, and vehicle.
- Insurance tracking and reminders. Keeping your vehicles insured helps prevent defaults and major credit loss if a car is damaged, but the administrative overhead makes it difficult to stay on top of each policy. LoanPro lets you save insurance information to each account, and can send out automatic reminders to both the borrower and your agents before a policy expires.
- Customer portal and self-serve tools. Most borrowers prefer making payments and viewing account info online. If you let them, it also helps free up your phones and stay efficient. LoanPro offers an out-of-the-box customer portal, allowing borrowers to send payments, upload documents, and view their account information without the need for any back-end coding. Or, if you use your own portal or app, LoanPro’s API can seamlessly integrate into our platform, keeping your operation centralized in a single source of truth.
Repossession is no one’s first choice
The economics of recovery are working against you. Even vehicles kept to a careful maintenance schedule depreciate, and if the car’s been handled roughly, its value might have dropped significantly. On top of that, you’ll be spending time and money as you recover the vehicle, clean it, and prepare it for auction or reselling, further compressing your margin. What’s more, you’ll be starting from scratch with origination.
Hardship programs
Repossessing a vehicle should be a last-ditch effort. Long before you recover a vehicle, you should consider your alternatives. The overwhelming majority of motorists, given the chance, would prefer to keep their car. If your month-to-month cash flow can grant them some leeway, you can often keep borrowers engaged and prevent defaults by offering a hardship recovery program.
Most hardship programs change some combination of payment dates, payment amounts, fees, and interest rates to create terms that are temporarily far more forgiving than the lender would usually offer. Rather than missing those payments, falling behind, and eventually defaulting on their loan, the borrower can stay engaged and in control of their finances, returning to regular payments once their situation improves. With the borrower keeping the vehicle and you keeping more long-term profits, it’s a win-win.
Efficient, compliant recovery
Unfortunately, it sometimes is necessary to repossess a vehicle. When you do, it’s important to make that recovery both efficient and compliant. Each state has its own set of laws and regulations defining what can be repossessed and how it can be done, and running afoul of any of them could mean losing the collateral item and incurring fines. If your own agents are recovering vehicles, work with your compliance team to make sure they’re staying safe and working within the law.
An alternative is to use third-party recovery services. LoanPro has a direct integration with the Recovery Database Network (RDN), allowing you to automatically initiate repossessions and auctions, and updating accounts with the appropriate statuses, portfolios, and processes within LoanPro.
To keep compliant with widely varying state laws, LoanPro's Compliance Guardrails can adapt your repossession processes to match the requirements for each borrower's state. Using automations, checklists, and walkthroughs that guide your agents through each step of the process, we can make sure that accounts smoothly go through your repossession process, and modify that process based on both local laws and your own business logic.
Upgrade your auto lending
Whether you’re looking to upgrade from spreadsheets and sticky notes, struggling with your current platform, or just curious about how other providers are growing their portfolios and margins, reach out to us. We understand the unique challenges that automotive lenders face, and we’ve seen firsthand how to overcome them. We’d love to learn more about the successes and struggles you’re seen, and talk about how LoanPro’s automotive lending and credit platform can drive your business forward.
