Many Americans increasingly financially strapped, as well as uncertain what their financial future will bring — and borrowers aren't the only ones at risk.
Future market volatility has the ability to impact a vehicle’s perceived value between now and when a member pays off their loan. Today’s larger loan balances and longer loan terms leave them at risk of being upside down, with a vehicle worth considerably less than what they still owe.
As a result, this also increases risk for lenders in their loan portfolios as they are providing loans to their members for vehicles with a hyperinflated value. If the collateral sustains damage or loss when a borrower is uninsured or underinsured, the financial institution can also find itself “upside down,” with the claims amount they receive insufficient to cover its exposure.
The solution? When you partner in a high-quality collateral protection program with State National, you can receive Waiver of Actual Cash Value (ACV) coverage — which means State National will pay the value of the entire loan amount remaining and not just a car’s value at the time of a claim.
In “normal” times, Waiver of ACV coverage is a valuable tool for decreasing risk in a lender’s portfolio. In times like these, when lenders are already being double-squeezed by low net interest margins and increases in bad debt, it’s a vital part of a successful risk mitigation strategy.
For more information on how this valuable solution can help you manage risk in your auto loan portfolio, contact one of our specialists today!
To read the second article in this SNC Spotlight series, visit Part 2, Maintaining Your Competitive Edge.