From the Desk of Roger Douville: Collateral Lending

by Julia Guardione Updated on: June 10, 2019

On Collateral Lending

The amount of data at my fingertips is at times daunting. Tens of thousands of applications streaming in to our processing center provides a unique perspective of the human financial condition in today’s economy.

Generally, we have experienced a slight improvement in credit quality reflected in an increased number of applicants with FICO credit scores above 660. In 2018 the percentage of applicants with credit scores above 660 increased to 51% from 48% the year before and 37% in 2016.

But credit score doesn’t tell the whole story, does it?

The two most prominent reasons applications are denied is Loan to Value percentage (LTV) and Debt to Income percentage (DTI). What may surprise you is that 30% of applications with a FICO greater than 700 are denied for LTV.

I recognize that one of the most insulting names you could call a loan officer is a “collateral lender”…but if the shoe fits? Whether or not they would admit it, your team is rendering credit decisions based on their expectation that the auto will be repossessed and a loss will occur. We tend to focus on the less than 1% of applicants that will default and forget about the 99% that will pay.

Think for a moment about the lost opportunity in that 30%. Do your loan officers recognize what the dollar amount of the negative equity percentage is? What is the dollar equivalent to that LTV value? Is 127% LTV effectively $4,000 or is it $14,000.

What is the negative equity in dollars and would you give that same borrower an unsecured loan for that negative equity amount? If the answer is “yes” then why not grant the approval, write up the exception in the loan decision and take the title as collateral?


Roger Douville

Want to read more?

My Management Philosophy

Delinquency and Decisioning

Rising Above


About The Author

Julia Guardione

Julia Guardione is an auto refinance writer based in Austin, Texas. She is a graduate of Texas State University and a lover of all things outdoors.

Read More

by Cristy S. Lynch

Car Loan Refinancing and COVID-19: What You Need to Know

The pandemic has impacted auto loan refinancing applications. Here’s why. In just a short time, the coronavirus pandemic has changed a lot about how we function as a society. Every industry has been impacted in one way or another -- and that includes financial services. The recent rate cuts…

by Stephanie Colestock

Cosigning an Auto Loan With Your Child: Is It Ever a Good Idea?

Guaranteeing an auto loan as a cosigner may seem simple, but there are a few key details to keep in mind. Financing a vehicle can be a tough process if you have a limited credit history, derogatory reports, or are just getting started in your career. In some cases,…

by Taylor K. Medine

How Car Loan Principal Works

The process of paying down loan principal ahead of schedule isn’t always straightforward. You’ve probably seen the terms “loan principal” or “loan principal balance” floating around on your car loan statement. Whether you're motivated to pay off your loan early or you're considering a car loan refinance, these numbers…

review review

Customer Reviews

Read our 11713 Certified Reviews


apply now apply now

Apply Now

Lower your interest rate and drop monthly payments by an average of $83*/month!