Credit unions playing larger role in consumer lending

Amortization software can help credit unions ensure that their customers are placed on sustainable repayment plans.

A recent article in the Credit Union Times looked at how these institutions are stepping up their involvement in making loans to consumers. Contributor Michael Muckian interviewed several officials from the Credit Union National Association (CUNA) and other industry groups to find out what is driving the growth in borrowing and why consumers are turning to credit unions for loans, rather than banks.

"Credit unions are no longer on the verge of a lending surge, they're in the verge and in a big way," CUNA Mutual chief economist Steve Rick told the Times. "We're projecting a 9.6 percent loan growth rate for 2014, the largest we've seen since 2005, when loans grew 11 percent."

The overall increase in lending volume has been driven by rising property values, stronger performance in the stock market and improvement in the job market, which have all contributed to growth in household net worth and consumer confidence. But what are borrowers looking to buy?

Data from CUNA's Financial and Statistical Trends program shows that auto loans are contributing the most to growth. These purchases were put off during the recession, but now Americans are comfortable investing in new vehicles. Credit cards, first mortgages and home equity loans have also grown.

Although larger credit unions may have more capacity to make loans, Rick said the data indicates that credit unions of all sizes are benefiting from the current trend to an extent. He added that the growth in credit unions' lending businesses has been greater than that of banks recently, due to their ability to offer lower interest rates.

Other stakeholders emphasized a need for more caution. CUNA Lending Council Chairman Bill Vogeny said that "credit unions are going to have to work pretty hard for whatever they get."

When making new loans, credit unions must ensure that they are putting borrowers on a sustainable path to repayment. Using high quality amortization software can help prevent lending opportunities from turning into liabilities.