Rate plays a significant factor in a borrower’s decision about which lender to choose. Deal-level pricing can help lenders capture more applications by assigning borrowers custom rates while simultaneously pricing better for risk.
Eighty-three percent of consumers who have at least one loan said rate factors into their decision about which lender to choose when applying for a new loan, according to 2017 consumer trends research from Fiserv, Expectations & Experiences: Borrowing and Wealth Management survey. In today’s auto lending market, there is more data available than ever before for making credit and pricing decisions. As a result, lenders do not have to rely on traditional methods of scoring to capture new borrowers. Deal-level pricing offers an alternative approach to assign rates specific to the individual while effectively accounting for risk.
Understanding the benefits of deal-level pricing starts with a breakdown of the traditional methods still widely used. The pros and cons of FICO and custom scoring are addressed in this paper alongside a stronger alternative approach, custom rates through deal-level pricing.