Timely payments from borrowers are vital to maintaining a healthy lending business. One way to increase payments is through an open and effective line of communication. No matter what type of loan you’re dealing with — car, personal or mortgage — lenders and borrowers should be able to easily communicate to ensure both sides remain in good financial standing.
In this blog, we'll cover the importance of communication in the lender-borrower relationship and what techniques and channels are most effective.
Why Is Communication Important?
Communication is essential in any relationship, and the relationship between lenders and borrowers is no exception. Effective communication ensures borrowers understand their loan obligations, make timely payments and have adequate access to support and resources when needed.
Late payments can harm lenders and borrowers. For example, lenders rely on these payments to support their businesses, including funding new loans, covering expenses and maintaining operations. So when borrowers fall behind on loan payments, it can negatively impact the business. As for borrowers, late payments can leave them drowning in debt and potentially lower their credit scores.
Whether a late payment is due to financial hardship, incorrectly entered payment information or simply a memory lapse, a borrower's lack of communication with their lender can worsen the situation and lead to a cycle of negative payment behavior. However, with regular contact, a healthy relationship can be maintained by both parties. When borrowers feel heard and supported, they are more likely to try to work to maintain payments and extend their business relationship further.
Types of Lender Correspondence
Automated messages are pre-written messages automatically sent to customers at a specific time or due to a particular trigger or event, such as customer status, account activity and business rules. For example, they can deliver customer service, marketing, reminders and notifications. Some of the types of messages that lenders send to customers include the following:
- Payment reminders act as a gentle nudge to encourage borrowers to make or schedule an upcoming payment. These alerts include information such as the amount due, due date and payment options. They help to accelerate payment collection and keep borrower accounts current while also improving cash flow for the lender. With automated messaging, lenders can customize the frequency and timing of the messages based on the borrower.
- Late payment notifications are helpful when a borrower misses a payment. These automated messages may include details on late fees incurred, penalties that may apply and information on how to bring the account up to date. These messages may also provide options for support and resources if the borrower is experiencing financial difficulties.
- Account status updates are another way for lenders to maintain contact with borrowers. They can send automated account updates regarding balances, new offers, processed payments and even updates related to paid-off loans and account closures.
- Marketing messages are an excellent way to retain customers. These messages may include information on personalized offers, promotions and other incentives that encourage customers to continue doing business with them.
- Account alerts come in handy today with cyber threats on the rise. If suspicious activity occurs, lenders may send automated alerts asking the borrower to verify or protect their account.
Communication Methods to Choose From
Messaging management solutions for lenders can integrate with back-office systems and allow lenders to send borrowers messages via automated email, SMS text message, and mobile and online portals. In today's world, most customers opt for digital correspondence, as paper statements and reminders can be easily lost in the mail.
However, by sending automated monthly statements, documents and notices via digital channels, lenders can track messages and engagement, including initiation, delivery, receipt, response, undeliverables and auto reroutes. They can also include links to URLs that lead directly to websites, apps and payment pages to make submitting payments more convenient for borrowers. Through these efforts, lenders can seamlessly reduce delinquent accounts.
Craft an Effective Message
There are some key elements to include when crafting a message from a lender to a borrower. First, it's essential to cover all the bases, including personalizing the message by addressing the borrower by name. Lenders should also include the due date, account balance, payment due and payment options. Additionally, if there's a specific link for borrowers to submit payment, including it in the message can make the process more convenient.
Ending the message with a clear call to action can encourage borrowers to submit their payments on time. For example, "Please be sure to submit your payment by the due date to avoid late fees" can drive them to take action.
Increase Payments Securely with REPAY
Through customized and strategic messaging, you can improve customer satisfaction and reduce late payments without draining your resources and employees. REPAY has the solutions and expertise to keep your company's cash flowing and your customers satisfied. We offer a secure, user-friendly portal for designing, sending and tracking borrower communications. You can also import, export and manage lists and define target audiences.
With REPAY, sending a simple text message to a borrower can help them avoid late fees and keep their account current or bring it up to date. If you're ready to learn more about our messaging management solution and how it can integrate with your existing systems, contact us today.