We know—lending hasn’t enjoyed quite the popularity of deposits and liquidity recently. But “credit” is literally part of the credit union name. What are you going to do… not lend?
The reality is that lending is still critical. It’s revenue. It’s memberization. It’s community support and development.
The key is lending smarter, better, and from a broader, more qualified pool of applicants. That’s where loan facilitators come into play. Read on to see our favorites.
Major Credit Union Lending Partners
When people look for personal loans, search engines are likely to show them SoFi, Citi, and large aggregators like Credit Karma, among others. Credit unions can’t compete well with these national players…
That is, unless they partner with one.
There are a handful of major platforms that team up with credit unions to improve their visibility and access to borrowers. These lending partners manage the acquisition, underwriting, and processing, and the credit union handles the funding and creates their unique parameters.
The following lenders have the reach, the reputation, and the resources to sustain high-quality, high-performing loans that meet credit union needs. And, most importantly, the following platforms readily partner with credit unions.
1. Splash Financial
Splash Financial, CUSO, is a turnkey digital lending platform that helps credit unions acquire extremely high-quality personal loans. Splash Financial also offers student loan refinance options, offering a viable competing product to SoFi, Earnest, and similar neobanks. Consumers who borrow through Splash Financial become members of the credit union lender, making Splash Financial a new member engine as well.
What we like: Hyper customizable platform, outstanding borrower characteristics, extremely high-quality loans, memberization of the borrower, credit union focus, credit union investors, very flexible terms for partnering credit unions, highly explainable decisioning reduces regulatory risk.
Where it may fall short: Not a good fit for smaller and mid-size credit unions, doesn’t offer auto lending.
Average borrower characteristics: 750+ FICO (WA), $135K average income
2. Upgrade
Upgrade acts as a loan facilitation partner for credit unions that emphasizes their ability to help credit unions with balance sheets solutions and liquidity. Their credit union loan partnerships currently emphasize purchase of facilitated loans (including personal, credit card, and auto refi).
What we like: Very good borrower characteristics, memberization of the borrower, balance sheet solutions, flexible terms for partnering credit unions.
Where it may fall short: Partnerships seem mostly geared exclusively toward buying loans, borrower characteristics aren’t as strong as competitors, will not release servicing.
Average borrower characteristics: 717 FICO (WA), $115K average income
3. Upstart
Upstart acts as a credit union loan facilitation partner that sources and originates loans from multiple sources. They offer loan partnerships for auto and personal loans, and their AI decisioning model has shown 53% fewer defaults than traditional underwriting criteria when lending at the same approval rate.
What we like: Good borrower characteristics, high-quality loans, memberization of borrower, flexible terms for partnering credit unions, referral network, white-label website platform.
Where it may fall short: Committed annual loan amounts, AI underwriting may not be as explainable to regulators.
Average borrower characteristics: 704 FICO (WA), $92K average income
Comparing Loan Facilitators
There are a few things that credit unions should consider before choosing a lending partner (such as one of the “big 3” above):
- Who is the lender? Will the credit union be the lender, or are they simply purchasing the loan indirectly? Will the credit union gain the borrower as a full member with opportunity to grow share of wallet, or will the platform keep exclusive rights to marketing.
- Is the lending contract exclusive? Can the credit union partner with other platforms, facilitators, or balance sheet solution providers? Will a partnership reduce the credit union’s flexibility or agility?
- How flexible are the contract terms and program control? Can the credit union increase or decrease their loan volume as needed? Can the credit union raise and lower rates as needed? Can they filter loans geographically or by SEG? Is servicing an option? Will the credit union’s brand be highlighted?
- How explainable are the credit models? Will regulators (like the CFPB) be comfortable with the credit models being used?
- What kind of support will the credit union get? Will the credit union get a support team, a single account manager or specialist, or will they be (mostly) on their own? Will the support be involved and proactive, or will the credit union be tasked with its own success?
The best lending partner for you may depend on the factors above and what types of loans you want. Countless credit unions have partnered successfully with all 3, so there is no objectively “wrong” option.
However, given the strong personalized focus and exceptional borrower characteristics of Splash Financial, we recommend it for larger credit unions looking for lending partners.
Learn more about Splash Financial, CUSO, here:
