woman typing at a computer keyboard
ComplianceFinanceOctober 22, 2020

Essential steps to managing loan risk during the coronavirus pandemic

Sadly, the coronavirus outbreak doesn't just pose a risk to physical health. Job losses, furloughs, business disruption, and the exhaustion of emergency benefits also threaten many businesses and personal livelihoods. As just one example, NPR reported on a wave of people who have already skipped car payments because of lost income during the coronavirus pandemic. Even worse, NPR also predicted what they called an impending "tidal wave" of potential defaults in the future.

How auto lenders can survive and thrive during and after Coronavirus

A potential spike in defaults puts more pressure on lenders to have their portfolios perfected. Here at Lien Solutions, our own experience suggests that as many as 25 percent of auto loans have perfection issues, even without the additional complication of an economic downturn. Furthermore, most lenders struggle with a number of time-consuming tasks required to manage loans.

Meanwhile, our titling solutions help your financial institution streamline lien management to reduce risks while slashing workload by as much as 75 percent. This highlights some examples of the ways we help our customers reduce risks and work more efficiently:

  • We help handle exceptions in your auto lending portfolio and achieve title perfection faster and more efficiently
  • We can help add or remove lien holders to properly protect your assets
  • We securely store paper titles to ensure they're always at hand
  • We help address toll violations and associated fees

Learn how auto lending businesses can prepare for pandemic-related disruption

While it's no time for the auto lending industry to panic over loan risk, banks and other auto lenders should certainly take steps to prepare for increasing disruption. That includes handling defaults and exceptions, adjusting to remote work, engaging with customers in a new digital way, and possibly preparing for increased regulatory scrutiny. Take a look at some of the topics covered in our complimentary webinar, "Practicing sound loan management in a COVID world."

The current lending landscape

To help predict the future, it helps to look at the current auto lending landscape. Over the last decade, auto borrowing spiked more than 90 percent. This represents $1.3 trillion in loans, and almost five percent is already at least 90 days delinquent and that is likely to climb. With the economic downturn, lenders have to negotiate a riskier business environment.

Regulatory controls

Besides increased loan risk, lenders have concerns about regulatory oversight. Current oversight regulations don't appear to have changed much but do recognize that the pandemic presents new challenges. At the same time, the situation has put more pressure — not less — on lenders to ensure they have proper documentation. Otherwise, they can still risk penalties, legal action, and damage to their reputations.

Learn more about improving loan management during and after the pandemic

In an effort to help educate clients and the auto lending industry at large, we have produced a webinar to discuss lending best practices during the Coronavirus crisis. This webinar provides analysis and solutions from our key executives and independent experts with decades of experience in the industry.

Watch "Practicing sound loan management in a COVID world" right now or review our solutions for auto lenders and contact us today.

Webinar for Motor Vehicle - loan management in a covid world
Watch Video
Lien Solution's Marina Hardy
Senior Marketing Manager
Marina Hardy is Senior Marketing Manager for Wolters Kluwer Lien Solutions. Her expertise is in program management, solutions marketing, product management, operations, customer experience, market research, and analytics.