We gathered three examples of how auto lenders successfully implemented a GPS collateral management solution like GoldStar to better serve their customers and grow their auto loan portfolio. You can use these guidelines and best practices as a model for establishing your own program.
Example 1: Collections Practice
To get a feel for a GPS platform, oftentimes lenders roll it out in collections first.
To redeem a repossessed vehicle, customers must:
- Agree to have the GPS device installed at their expense
- Sign the legally required disclosure statement
- Pay all collection costs
Once a lender has built up its program with solid guidelines, its program can be extended to include loan origination as well.
Example 2: Risk-Based System With Additional Inclusions
Some lenders use credit scores and other risk factors to determine when to have a GoldStar GPS device installed. They may require it on all “C” and “D” paper, as well as “A” and “B” paper when certain risk factors apply:
- Flight risk — An applicant who became a customer of the lender within the last 12 months or is planning to relocate more than 50 miles away from the lender
- Previous repossession — An applicant who had an auto repossession in the last five years and/or had more than two auto 30-plus-day-late marks on a credit bureau report
- Bankruptcy — An applicant who has an active bankruptcy or a bankruptcy discharged less than three years ago
- Limited credit — An applicant with limited credit who has not had a trade line equal to or greater than the applied-for purchase amount
- Redeemed repossession — When a customer wants to redeem a repossessed vehicle, a GPS unit is installed at the borrower’s expense, he or she must sign a legally required disclosure statement, and the borrower pays all repossession costs
Example 3: Score and Employment
This is a popular program because it’s easy and fast to implement. A GPS, like GoldStar, would be required for all borrowers with a credit score below 600, or for repossessions to be returned to borrower.
- Proof of income is required
- Employment is verified — must be at least 6 months on job
- Debt to income (DTI) of less than 40%
- Insurance must be obtained prior to loan closing
- Minimum down payment required is $500 to $2,000, depending on the loan amount
- Interest rate ranges from 15.9% to 22.9% based on sliding scale of DTI plus credit history
- Requires payroll deduction or automatic payment from the account. If auto payments are cancelled, interest rate increases by 3% or maximum allowed by law (whichever is less)
For more information on how to implement a GPS collateral management system to safely grow your auto loan portfolio, ask the experts at Spireon.
This article was written by Youssef Mogadam.
