An increasing number of credit providers are incorporating borrower-friendly tactics into their collections strategies, such as hardship relief programs and repayment programs, all with the goal of helping customers stay engaged and current on their account amid financial difficulty, thereby avoiding defaults.

During the early stages of the COVID-19 pandemic, for example, one LoanPro client was able to launch two complementary hardship programs within just two months, rapidly pivoting their operations to avoid defaults during an unforeseen financial panic.

This article will explain how LoanPro can support these strategies using our servicing, collection, and product configuration tools. But what’s listed here is really just the starting point: LoanPro’s configuration-first approach means that we have the versatility to support processes fine-tuned to your own policies and business logic.
 

Hardship programs

Most hardship programs work through some combination of delaying payments, lowering payment amounts, or temporarily reducing the interest rate.

For installment loans and leases, all of these changes can be accomplished through custom payment schedules. You can modify existing accounts with a new amortization schedule, changing the payment frequency, amount, and interest rate.

For a card or line of credit account, you can adjust the interest rates or add interest abatement periods on each of the account’s buckets. You can also use transaction level credit™ to enable continued access to credit for groceries and other essentials, but block or charge greater rates on other spending.

Interest and fee forgiveness

If a borrower has already gone into deep delinquency, they may simply default on the debt, preferring a hit to their credit score over the prospect of repaying all their interest and late fees. To discourage them from defaulting and hopefully recover the principal, you can forgive interest and fees on the account.

Alternatively, you can set a max interest to limit the total dollar amount of interest that can accrue on the account, making your loan more borrower-friendly from the outset.

LoanPro’s real-time calculator and audit trail make this simple: You can delete fees, manually adjust interest, or log a credit to cancel it out. In any case, LoanPro keeps a comprehensive record, ensuring you have clear visibility into any changes made.

Accelerated repayment

Another popular option is an accelerated repayment plan. This is ideal for when a borrower is able to make payments and realizes they could save money on interest by paying down their balance faster. As the credit provider, this works as a trade-off: sacrificing some short-term interest profit for long-term customer engagement and loyalty.

While you could use a custom payment schedule to modify the account’s amortization table and timeline, you and the borrower would likely be better off with an AutoPay. Unlike many systems, LoanPro’s AutoPays can be scheduled independent from the account’s normal due dates. Just set up an AutoPay to make payments more frequently or in greater amounts, and LoanPro will handle the rest.

Customer outreach

Regardless of how your hardship or repayment programs work, you’ll need a way to get that information to borrowers and get their approval to make changes to their account. LoanPro’s Communications Suite and Automation Engine can identify borrowers who qualify for these programs (based on your own business logic) and then send them personalized information and offers through email, direct mail, or SMS. And with our e-signature and document management tools, you can save a borrower’s agreement directly to their account.