Overview
Audience
- Newly-appointed Personal Lending Managers
- Support staff responsible for gathering and interpreting information for the lending managers
- Staff responsible for the management of bad and doubtful debts who need a working knowledge of the decision-making process which led to the lending being made
Lending to Personal Customers – Consumer Lending – demands a high-level of skill in the assessment of individual lending proposals.
In many cases it has none of the sources of financial information traditionally associated with Corporate Lending – Balance Sheets, Profit & Loss Accounts etc. – and relies more on the trust and rapport built up between the customer and the lender.
By the end of this course lenders to Personal Customers will be able to:
- Understand the process for assessing lending propositions from Personal Customers
- Utilise that process to come to a logical decision to agree to the loan or to decline it with robust reasons
- Manage and control a Personal Lending portfolio to ensure, as far as possible, that all loans are repaid in full. (Remembering that there’s no completely risk-free lending…!)
- Build rapport with customers to (try to!) ensure that all their loans are fully repaid
Course Outline
Module 1
- Analysis of Personal Lending propositions
- What information must customers provide to us?
- What extra information should customers provide to us?
- How do we analyse that information to check its authenticity?
- CAMPARI as a mnemonic for analysing Personal Lending propositions
- Character: what do we know of the customer – for instance their track record with the bank and previous loan history
- Ability: where are the repayments coming from – what “spare” cash does the customer have to finance loan repayment?
- Margin: what is the correct interest rate for the lending – this is the “rent” that we are asking the customer to pay for our money and will reflect the appropriate degree of risk
- Purpose: why does the customer want the loan – are they buying / financing a purchase that is acceptable to the bank and is the repayment period appropriate for this type of purchase?
- Amount: how much does the customer want to borrow – are they contributing anything to the purchase prices or is the bank being asking to lend 100%?
- Repayment: what is the repayment schedule – will the customer be able to maintain these payments for the duration of the loan?
- Insurance: what security (collateral) would we expect to be offered – how easy will it be to prefect this security giving the bank the “Insurance” it wants?
Module 2
Interaction between Lender and Customer
- Understanding behaviours
- How is our behaviour developed by previous interactions (both inside and outside the bank)?
- How is our customer’s behaviour also developed by many interactions
- How can we ensure that we understand customers’ behaviours and, just as importantly, they understand ours…?
- Effective Communication
- What do we mean by Effective Communication?
- How is Effective Communication affected by first impressions?
- How is Effective Communication affected by different modes of communication: face-to-face / audio / e-mail / etc.?
- Building (and maintaining) rapport
- Understanding Emotional Intelligence in building (and retaining) rapport with customers – and, coincidentally, with colleagues…
- Using Goleman’s 5 steps to Emotional Intelligence in customer interactions
- Self-Awareness
- Self-Management
- Motivation
- Empathy
- Social Skills
- The levels of rapport – and how we achieve them
- The Berne model of communication – and its link to rapport
- Interview techniques
- Getting the right information
- Checking the accuracy of that information in discussions
- Challenging ambiguities (or information that seems to be incorrect)
- Asking for alternatives / Offering alternatives
- Effective Listening techniques
Module 3
- Making the decision
- How do we arrive at the correct decision?
- Balancing “pros” and “cons”
- Re-analysing the CAMPARI information then…
- Structuring the lending
- Setting up the loan to meet the optimal “shape” of the loan:
- Optimal to the bank
- Optimal to the customer
- Creating the appropriate documents and getting them signed before advancing the money…
- Setting up the loan to meet the optimal “shape” of the loan:
- Insurance
- What security does the bank think is appropriate for this lending?
- Is the bank prepared to lend unsecured?
- Why not…?
- What security does the customer have to offer?
- How does the bank perfect the security to ensure that it is adequately protected in the event of default?
- …and Getting Repaid!
- Setting up the appropriate monitoring process for the loan to ensure that repayment is always (as near as possible) on schedule
- What actions do we need to take if the repayment deviate from the agreed schedule
- At what stage do we start to worry…?
Module 4
- Monitoring the Lending Portfolio
- What regular monitoring processes should the bank have in place across the entire Lending Portfolio?
- What are the early-warning signs that the bank should be looking for?
- At what stage do these early-warning signs actually mean that the loan (loans!) are out-of-order?
- Customer Interactions (revisited)
- How does the bank communicate with the customer now that the lending is not performing as agreed (and expected!)?
- How must that communication process change from the initial communication when the loan was being discussed?
- Revised Interview Techniques
- Negotiation Skills
- What are the steps required to “negotiate” with the customer to get the best possible solution – both for the customer and for the bank…?
- Understanding the IVCs (Inexpensive Valuable Concessions) and WAPs (Walk Away Positions) available to the bank in arriving at an agreement
Module 5
- Bad and Doubtful Debts
- How does the bank decide that a loan is now “Bad”?
- What are the steps required now in trying to achieve repayment?
- What has changed now with information in the original CAMPARI assessment?
- What is the current CAMPARI assessment?
- How can the bank learn from previous assessments which, with the benefit of hindsight, turn out to have been incorrect?
- How should the bank re-schedule the loan agreement?
- When should the bank begin to realise its security?
- What legal recourse does the bank have in “forcing” the customer to repay…?
(Optional) Module 6
The course can also include the analysis and decision-making for small-business lending – for sole traders, partnerships and unincorporated entities
- Including the assessment of the more-traditional sources of financial information through Balance Sheets, Profit & Loss Accounts, and Financial Forecasts