The pandemic brought hard times for everyone, with individuals and businesses facing money crunches alike.
Loans piled up amid the financial crisis, and banks across the US landed into bigger problems due to growing debts.
While borrowers got extensions due to government rebates and schemes, the banking sector struggled to stay afloat.
Loan collection continues to be a concern in the new normal, even as things are better.
As a banker or lender, you need to realign your debt recovery strategies to ensure repayments while saving time and reducing costs.
Here are the best loan collection tips you can rely on in pandemic times.
1. Follow the borrower’s behavior
Most banks struggle with borrowers who always seem to have reasons to delay repayments. Implementing a data-driven process can help you understand their behavior and keep track of their journey.
You can leverage data to pinpoint the key characteristics of defaulters and steer clear of lending to them in the first place. At the same time, you can go the extra mile following up on the debtors with high default risk.
A data-driven approach can help you fine-tune your collection processes for the long haul, besides empowering your bank in pandemic times.
2. Create a multi-channel contact strategy
The pandemic has worked in the favor of banks by enabling digitization of processes.
You can use the new capabilities to enhance your collection process by creating a multi-channel contact strategy to reach the debtors.
Record the contact preferences of borrowers at the time of lending, and stay in touch across these channels. You have better chances of a collection with this approach as there is hardly a possibility of customers missing out on notifications.
3. Collaborate with an expert
The best advice for banks struggling with collections is to collaborate with an asset management partner. According to Stephen Izzi in PA, this strategy has helped many small banks and lenders in Pennsylvania stay afloat in the new normal.
Look for an asset firm specializing in loan collection so that you do not need to bear the burden of the task. This way, you can focus on revitalizing your assets and strengthening customer relationships while a team of experts supports your recovery operations.
4. Invest in process automation
Regulatory scrutiny is a part of the banking operations in the new normal. Banks are under the radar to ensure fair treatment of customers in challenging times.
Investing in process automation is a good idea to stay ahead of loan collection without missing out on compliance requirements. While automation ensures a better process, it also prevents human bias from your decision-making.
Moreover, you can avoid fines and penalties caused due to non-compliance. Not to mention, process automation makes your bank future-ready with better services for your customers and enhanced operations.
Loan collection is undoubtedly daunting for banks in pandemic times as delays, default, and regulations make it more painful than ever. But you can rethink your strategies to address these challenges and stay on track. The sooner you embrace them, the better it is.