Debt protection: A strategic business move for digital lenders
In today’s dynamic lending environment, institutions constantly face the challenge of balancing profitability with managing risk. The ability to protect your revenue while offering new and innovative lending solutions for your customers isn’t just important – it’s table stakes. This is where debt protection can come into play. Think of it not just as a solution you offer, but a strategic investment in your business.
What is debt protection?
Debt protection products safeguard lenders and borrowers from unexpected financial setbacks. These products cover outstanding balances and loan payments if the borrower is unable to make them due to circumstances like death, disability or involuntary unemployment. For lenders, these products provide much-needed security by reducing the potential impact of loan defaults.
Reducing this risk can add significant value to your business:
1. Safeguard your bottom line
Debt protection is essential in mitigating the financial risks associated with lending. Borrower defaults, whether due to unforeseen events or economic downturns, can leave lenders exposed to significant losses. By offering debt protection, lenders can reduce the likelihood of non-payment, ensuring that their loans are covered, even if the borrower experiences financial hardship. This kind of protection is particularly valuable for lenders in high-risk or volatile markets, where the likelihood of default may be higher.
2. Set yourself up for long-term sustainability
In the long term, debt protection products contribute to the overall sustainability of a lending business. By reducing loan defaults, improving cash flow and diversifying risk, debt protection creates a more resilient financial model, which improves your portfolio performance and is attractive to capital investors and sponsor banks. Lenders who offer such protections are better positioned to weather market fluctuations and economic downturns, making them more adaptable and capable of navigating challenges while maintaining profitability.
3. Build customer trust and satisfaction
One of the greatest advantages of offering debt protection is the boost it provides to customer satisfaction and confidence. Securian Financial recently conducted a consumer study on the impact of protection products and 80 percent of those who bought payment protection were satisfied with their decision to purchase. And 75 percent said they are likely to repurchase the product again and would recommend it to others taking out a loan.1 These customers found that the small added cost to be worth the protection of their finances and credit score.
Think of it this way. Consumers are used to purchasing protection products – whether it’s trip insurance or insurance on electronics, furniture or other personal investments. Including debt protection as an option on a loan can reassure customers. This added peace of mind fosters stronger relationships, increases customer loyalty and enhances your institution’s reputation as a responsible and customer-first organization.
4. Remain compliant in a changing regulatory environment
As financial regulations continue to evolve, debt protection products can help lenders remain compliant with laws designed to protect consumers. By offering debt protection, lenders can demonstrate a commitment to consumer welfare, ensuring that they are aligned with industry regulations aimed at reducing borrower distress during tough financial times.
When choosing a debt protection program, there are advantages to leaning on an expert. Foremost, you have robust product offerings and claims adjudication, but equally important, you have the confidence of sound compliance in a forever-changing regulatory environment. For example, at Securian Financial, our solutions come with a compliance guarantee.
5. Add another revenue stream
In addition to risk reduction, debt protection products can provide a valuable revenue stream for lenders. Typically offered as an optional add-on to loans, these products can generate additional income with minimal overhead. As consumer awareness of debt protection grows, offering this service can enhance your product portfolio and attract more customers seeking peace of mind when taking out a loan.
Your trusted partner for what’s next
As financial landscapes continue to evolve, offering debt protection will not only protect your bottom line—it will also reinforce your commitment to responsible lending and customer care.
At Securian Financial, we offer innovative debt protection solutions to help you grow and protect your business. We work with you to understand your business and loan processes and seamlessly integrate our solutions with your technology. Contact our sales team to learn how we can tailor our products to best meet your needs.
