Risk Based Lender
"The Credit Union Solution"






1.   What is Risk Based Lending?
2.   Won't our higher risk members resent the higher interest rate?
3.   If we issue higher risk loans, how can you say that we can reduce risk?
4.   What do you mean that your system ensures fairness. We’re always fair!?
How can you properly evaluate a loan application in a few minutes?
6.   How will this program help me monitor loan trends and performance?
7.   How could this program increase my credit union’s profitability?
8.   How do I "customize" this system?
9.   What do you mean that this is a “complete solution”?
10.  Why is your selling price so low?

11.  Is this the same package as "The Complete Solution for Credit Unions"?

12.  What is your "365 Day Risk Free Trial Offer"


1.  What is Risk Based Lending?

Simply stated:   Risk based lending allows the credit union to charge different members—different loan rates—thereby more closely matching the anticipated risk with an appropriate interest rate.  

It does not mean that the credit union suddenly opens the doors to higher delinquencies and write-offs.  Nor does it mean that certain members are penalized.  The opposite is true. 

Risk-based, or tiered-rate lending, helps you to identify, isolate, and then manage the different types of risk within your loan portfolio. If you choose to take on additional risk, it becomes "managed risk" rather than "circumstantial risk"

As far as penalizing members -- take a look at the “make-up” of your current loan portfolio.  Chances are high that it consists primarily of your “middle-of-the-road” average member.  Although this may represent the majority of your membership base, your one-rate program fails to serve a significant portion of your members -- at both ends of the risk spectrum. 

  • Your low risk members have earned the right to the lowest possible rates—yet your higher than warranted one-rate policy encourages them to shop elsewhere.
  • Your higher risk members, on the other hand, are denied credit due to your need to control loan default and write-offs.  They are forced to go elsewhere for their borrowing needs—usually to high interest finance companies. 

Risk based lending allows you to assign an appropriate interest rate to all tier levels -- thereby providing each tier group the best possible service.

2.  Won't our higher risk members resent the higher interest rate?
Not at all, in fact some of your strongest supporters will come from the higher risk members.  Why?  As mentioned in the above question, in the past, you probably had to disapprove many of their loan requests in order to limit the risk of loan default—it’s one of the major drawbacks of a one-rate loan program.   

A properly implemented risk based lending program solves this problem by allowing you to assign risk adjusted rates to each risk category.  You are now better able to serve the borrowing needs of a larger segment of your membership—including your higher risk members—at rates that are much lower than the rates many of those members had to pay at finance companies.

3.  If we issue higher risk loans, how can you say that we can reduce risk?

When I first thought about risk based lending, I got stuck on the “risk” part of risk based lending.  Upon additional research, however, I realized that I could gradually extend my lending base parameters —with less over-all risk to the entire loan portfolio.  How?  By having the tools in place to better identify and manage default risk.   

And that is the key to risk based lending— any additional risk that you accept becomes managed risk — rather than circumstantial risk. 

This program provides the tools that help you identify and quantify default risk and then establish specific guidelines to manage and monitor that risk.  Any time you find better ways to manage risk—you have the ability to reduce it.

4.  What do you mean that your system insures fairness. We’re always fair!?

I’m sure you are—but if you had to—could you prove it?  This system standardizes the evaluation process and ensures that every loan applicant receives the same unbiased evaluation.  When there is an occasion for the loan officer to over-ride the matrix scores (within board guidelines), s/he will have clear and specific documented reasons.

Which program would you rather explain and defend?  One that relies on the subjective past decisions of a loan officer, or, a program with clearly defined written guidelines and uses an external, professionally developed national risk score.

5.  How can you properly evaluate a loan application in a few minutes?
Once you pull a credit report, it only takes a few minutes to complete the three-step evaluation process.  All parameters are clearly defined and easily plotted on the matrix.  Actually, I find that I can complete most evaluations in under a minute—with results that are far superior to previous evaluation methods. Exception approvals may take a little longer but are still much quicker than conventional subjective decision-making methods.

6.  How will this program help me monitor loan trends and performance?
Each loan is quickly recorded in the "Loan Officer Log", which also serves as your spreadsheet program data base.  Periodically, you transfer this data to your software spreadsheet program (Excel, Lotus, etc) and then easily analyze the data to identify: approval rates; branch/loan officer activity; tier-rate risk analysis, etc.  Plus, the Loan Officer Log" becomes a complete underwriting record for your annual Supervisory Committee Audit and NCUA Examination.

7.  How could this program increase my credit union’s profitability?
There are basically two ways to increase profits—you either increase income or decrease expenses.

  • Loan income will grow as you expand your loan portfolio to include a larger segment of your membership base (from both ends of the risk spectrum).
  • Expenses will decline through: increased efficiency and productivity; reduced allowance for loan loss requirements; and better management and control of default risk (charge-offs).
  • If you do choose to issue higher risk loans, the increased income should more than offset any increase in charge-offs or allowance for loan loss transfers. But as stated earlier, you decide when, how, and where to adjust your current risk levels.

8.  How would I customize this system?
This program uses a three-step evaluation process. Although the risk tiers should remain relatively constant (since they have been thoroughly researched and tested) – you may modify or "customize" any of the steps in order to ensure conformity to your credit union's specific objectives, underwriting requirements, and risk tolerance levels. Each step is fully explained in the program manual—as well as how to adjust each level to meet your objectives.   Essentially, I provide the foundation and then together we build the program step-by-step – by selecting different options.  Plus, as you become more comfortable with the program, you will be able to “fine-tune” each risk tier in order to optimized results for your credit union.

9.  What do you mean in your literature that this is a “complete solution”?
First of all—it is complete.  Everything you need is in the package. It includes the background information, a board of director’s proposal, the policy manual inserts, the matrix forms, risk based parameters worksheets, loan officer log, and a sample membership payroll stuffer.  All you need to do is select the risk score from your credit bureau and you’re ready to go.  You can start with my suggested guidelines or easily customize the tier levels for your own unique membership—it’s that simple.

Second of all—it is a solution.  This program not only addresses the problem that we all face with single-rate lending—it also provides a solution.  How many times have you walked into a “hot topic” seminar with great expectations—only to leave empty handed.  The speaker was entertaining—but where were the solutions?  Many times, it actually feels like you paid a hefty admission price to attend a multi-hour infomercial that was disguised as an educational seminar. 

This program won’t do that.  It provides solid, tested solutions—in black and white—at a fraction of the cost of those seminars.  And, unlike those seminars—if you're not completely satisfied—you get your purchase price cheerfully refunded—with no strings attached.

10.  Why is your selling price so low?
The price is low for several reasons:

  • The first reason is due to my low “overhead”.  There is no rent, staff, travel expenses, or fancy promotional items for you to pay for (through higher prices). I’m providing a proven system—at an extremely reasonable price.
  • The second reason is that my research turned me into an advocate for “tiered-rate” lending – I believe that it is quickly becoming a necessity for credit unions and will eventually become the standard.  My goal is to keep the price so low that “cost” never becomes a factor against offering risk based lending at your credit union.  As this program grows and evolves, the price will increase.  But for now, you have a chance to get in on the "ground floor" and an incredible price.
  • The third reason involves my future endeavors.  Over the next few years, I plan to offer several additional credit union management and marketing programs that provide “practical working solutions” to common credit union problems.  If I can get this package into your hands now—and prove to you how well it works—then you should be more receptive to my future offerings.  Well, at least that’s the theory.
At the very least, I wanted to remove as many obstacles as possible when considering a risk based lending program – starting with the price.  (Then, I removed the risk with the unconditional 365 Day Risk Free Trial Offer) 

11. Is this the same package as "The Complete Solution for Credit Unions"?
Yes, it is.  I changed the name because of the word "Complete" -- only because it implies a "finished" product.  This package is not complete in that it will continue to grow and evolve along with social changes and the  risk scoring environment.

It is "complete" in that it provides everything you need to implement a successful risk based lending program at your credit union.  However it will never be "finished” -- as new enhancements, on-going research, and updated revisions guarantee that this package will remain a "work in progress".  Basically, since this package was developed specifically for credit unions, I simplified the name to "The Credit Union Solution".

12.  What is your "365 Day Risk Free Trial Offer"?
I'm so certain that you will see this program as one of your credit union's best investments that I am making the following unconditional guarantee:

"Take a full year--365 days--to evaluate this program.  If, for any reason, you are not completely satisfied -- Simply return it to me for a prompt, hassle-free, courteous refund of your purchase price".   

That's it  -  No strings  -  No hassles  

Still have doubts about Risk Based Lending?
In 1997, CUNA published the results of the "Credit Union Executive's 1997 Risk Based Lending Survey Report" (CUNA Supply stock #20430).  According to their findings, the top 6 reasons for not offering a risk based lending program were..

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What other credit unions are saying:

"From the first page of your Risk Based Lender - The Credit Union Solution, I was hooked!  Saying that you have mastered risk based lending would be an understatement.  Thank God you have crammed your endless research into one perfect package for credit unions..."

Robin Simpson
Lanier Federal Credit Union

"I think your program is the most comprehensive and understandable of all of the RBL plans I have come across.  Thanks for a program that keeps it simple."

Ted Glunt
Altoona Postal Employees Credit Union

"I have to give you an update on your program.  We are 100.1% loaned out, our delinquency ratio is .16%, and we're making money hand-over-fist.  The members love the program and so do we.  Thanks again!"

Joan E. Wagner
Saratoga Springs Federal Credit Union

"Having managed  this credit union for 21 years, I was appreciative of your approach to the issues as well as the clear and concise way that the material and method was presented."

Wendy Bailey
Dor Wic Federal
Credit Union

"After a year of using the matrix, our turn around time is quicker, all loans use the same criteria, and we're able to lend to members that may not have gotten loans before. Thank you Dave for all your help."

Gail Isles
Falls Federal Credit Union




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