Garnet Capital Advisors Blog

If the old axiom is "grow or die," even non-profit credit unions must realize in this hyper-competitive financial environment that their survival depends on growing their membership. 

Membership growth was a big focus of the recent Governmental Affairs Conference sponsored by the Credit Union National Association, according to American Banker. The only way for a credit union to expand its loan portfolio, deposits, and net income is by serving a growing base of members. 

Meeting that growth challenge comes at a time when credit unions are competing not only with the banks down the street but with a growing number of fintech companies offering online financial services, ranging from checking accounts to same-day loans for several purposes. 

Credit unions are stepping up to the challenge by offering more digital services. They launch aggressive recruiting campaigns, and tailor services to their existing and potential members. 

Toward the latter effort, Garnet Capital Advisors offers several programs that credit unions could advertise to new customers. These could also work toward enhancing services to maintain existing customers. 

Home Improvement Loans

As mortgage interest rates rise and more homeowners decide to remain in their existing homes, this creates a market for home improvement loans. Homeowners will be happier in their homes after making improvements to fit their family and lifestyle. 

These loans also would create a great revenue stream for credit unions. The borrowers typically are more stable financially as they tend to be current with their mortgage payments. The loans also would be backed up by the homeowners' equity in their homes, meaning less risk for the credit union. 

Credit unions also could charge a higher interest rate on short-term home improvement loans over long-term mortgage loans. As a service to members, credit unions can offer home improvement loans at a lower interest rate than many financial institutions offer on home equity lines of credit, producing an extra incentive for membership.

Student Loans

Student loan borrowers typically turn to federal student loan programs rather than thinking about dealing with a local lender. Credit unions can change that narrative by offering student loans at a lower interest rate than the federal programs. The loan can then be serviced locally, rather than through a faceless national lender. 

The challenge for credit unions is having the capital to handle more than a small pool of student loans. Garnet Capital's program offers credit unions the opportunity to offer student loan financing through a third party, expanding their pool of money available for student loans. The credit union books a fee from the third party for each student loan that originates through the credit union. 

Third-party financed student loans offer a win-win-win for credit unions. They increase the services they offer members, boosting interest in membership; they increase their fee income through processing student loans; and they do this without the high risk of default that student loans often carry. 

Buying and Selling Loans

Garnet Capital Advisors offers other options for credit unions to help them maintain a healthy loan-to-asset ratio. Garnet Capital can help credit unions sell underperforming sections of their loan portfolio. We also can assist with purchasing loans from other institutions if your deposit rate is getting out of balance. 

Buying and selling of loans must occur within the strict regulatory compliance process, which makes using Garnet Capital a wise choice, as we understand compliance issues and ensure all transactions operate within regulations. Contact our loan portfolio experts to discuss the best ways for your credit union to maintain a healthy loan-to-asset ratio while remaining in compliance. All these services allow you to focus on providing the kind of winning customer service experience that keeps credit unions growing and thriving.