Lenders utilize alternative information to broaden automobile books

Auto lending institutions in the very first quarter leveraged TransUnion’s alternative information and underwriting designs to broaden their financing swimming pools as the marketplace continues to browse restricted stock and raised car rates.

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The alternative information sets permitted lending institutions to reach customers they otherwise wouldn’t provide to in order to grow their portfolios, Satyan Merchant, senior vice president and automobile magnate at TransUnion, informed Auto Finance News.

“Moving beyond the traditional data sets … lenders have explicitly said ‘we want to use [TransUnion’s] more sophisticated, alternative data sets so that we can lend in communities we don’t lend in primarily,’” Merchant stated.

Industrywide, automobile loan volumes fell 2% year over year to $81.5 million in the very first quarter, triggering lending institutions to broaden their reach, according to TransUnion’s Credit Industry Insights Report. As loan volume dipped, lending institutions sought to brand-new techniques to reach more customers while likewise increasing monetary addition in underserved neighborhoods.

Lenders “want to improve access to financing for the broad base of Americans … and using alternative data allows lenders to get a deeper insight into consumers,” Merchant stated.

Meanwhile, regular monthly payments on cars climbed up 13% YoY to $556, according to the report. As an outcome, lending institutions are using longer lease terms in order to get more loans on their portfolios.

Looking ahead, increasing automobile rates and supply chain obstacles are most likely to effect customer acquiring power in the coming quarters, and lending institutions will continue to lean on alternative information to improve loan volume, Merchant stated.

Editor’s Note: This story was formerly released on Bank Automation News’ sibling website, Auto Finance News.

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A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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