When you want to consolidate and reduce debt; when you need a new roof; when you need an expensive car repair; when your kids need braces, but you don’t have the money – where can you turn? Turn to your mailbox – with the rising prominence of alternative lending, you might find the financial resources you’re looking for.
Peer-to-Peer (P2P) lending, marketplace lending, social lending, crowdfunding and alternative lending are all lending methods directly backed by investors rather than financial institutions. Alternative lenders offer short-term financing, while traditional banks offer long-term financing. While traditional banking loans are considered “secure” because they require borrowers to put up personal assets as collateral, alternative lending loans are considered “unsecured,” meaning there are no assets required to back each individual loan. Ten years ago, alternative lending companies were few and far between. They emerged in the wake of the financial crisis and grew to provide billions of dollars in loans to millions of customers.
Using an alternative lender can be very attractive to applicants because they offer a simple and straightforward application process, variable repayment terms and quick cash, mostly via the internet. Although alternative lenders operate predominantly online, they find direct mail to be a lucrative tool for their direct marketing plans and take advantage of the effective and rewarding benefits direct mail delivers. DMA research shows direct mail outperforms electronic channels in acquiring new customers, achieving a 3.7% response rate when using a house list and a 1.0% response rate with a prospect list. Compare those to the result of all digital channels combined, which only achieve a 0.62% response rate.
Alternative Lenders Harnessing the Power of Direct Mail
Over the past year, direct mail offers from alternative lenders increased by an astonishing 48%. Quarterly direct mail volumes from alternative lenders averaged more than 618 million pieces Q3 2015 to Q2 2016 compared to 416 million pieces Q3 2014 to Q2 2015 according to Comperemedia. The top three users of direct mail for alternative loans were OneMain Financial/Springleaf, Lending Club and Prosper.
The trends alternative lenders are using to shape their direct marketing strategies are highlighted in a recent report from Competiscan. According to the report, the most frequently observed reason for acquiring a loan was to consolidate or eliminate debt, followed by home improvements and unexpected expenses. The messaging promoted the financial flexibility, shorter terms, lower rates and fixed payments offered by alternative loans.
Top Tips for Using Direct Mail in Alternative Lending
Alternative lenders are using direct mail to drive traffic to other marketing channels such as their website or call center. IWCO Direct developed a few best practices to consider for creating successful direct mail campaigns specific to this growing vertical:
- Card packages continue to deliver results for alternative lenders. With Drop-on-Demand (DOD) card personalization technology, a card can be personalized with the potential applicant’s name and your toll-free number or website as a call to action. To make sure applicants are prepared with the necessary materials, include a note saying, “Please have your official ID card handy when you call.”
- Use a “pre-selected” check in the dollar amount of the potential loan to focus the recipient’s attention. Then make it quick and easy for potential applicants to get in touch or learn more about the offer by including a website or toll-free phone number.
- Show prospective customers why your lending services and specific offer are the best fit for their needs. Consider using a comparison chart to illustrate the benefits of working with your company compared to other alternative lenders.
Contact us today to learn how our direct marketing experts can help alternative lenders increase their loan acquisition efforts.
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