The Impact of Loan Submission Declines on Consumers and Merchants
Why Full-Spectrum Lending Matters
Point-of-sale (POS) lending has revolutionized the way consumers finance purchases, from home improvements to medical procedures. Yet, despite its promise, many POS lending solutions focus only on “prime” customers—those with high credit scores and low financial risk. This narrow focus can lead to high decline rates for subprime or near-prime customers, leaving them without access to financing and creating missed opportunities for merchants. In this blog post, we’ll explore the impacts of these declines on both consumers and businesses and highlight the importance of full-spectrum lending as a way to address this challenge.
What Happens When Consumers Face Lending Declines?
For consumers, a financing decline at the POS can be discouraging and disheartening. Here’s how it impacts them:
1. Interrupted Purchase Journey: When a financing application is declined, it halts the buying process, often leaving customers with no alternative to complete the purchase. This can be especially frustrating for consumers who planned to make a larger purchase or cover a pressing expense.
2. Limited Access to Essential Services: In industries like healthcare, auto repair, or home improvement, POS financing is sometimes the difference between accessing necessary services or delaying them. For consumers whose credit scores don’t meet prime lending criteria, a decline may mean going without critical repairs or treatments.
3. Credit Score Anxiety: Applying for financing and being declined can impact a consumer’s credit score, adding stress to the experience. For subprime or near-prime customers, each decline reinforces the sense that financing is inaccessible to them.
The Ripple Effect on Merchants
Declines don’t just affect consumers; they have significant implications for merchants as well.
1. Lost Revenue: When a customer is unable to secure financing, the likelihood of the sale proceeding is greatly reduced. This translates into lost revenue for the merchant, especially for big-ticket items that rely on financing options to be affordable for customers.
2. Higher Cart Abandonment Rates: High decline rates can directly increase cart abandonment. In sectors where financing options play a crucial role in the sales process, decline rates can result in a substantial loss of conversions, as customers may leave in search of other financing options or delay their purchase altogether.
3. Brand Perception: For many customers, POS lending is associated with the merchant offering it. A decline from a merchant’s POS lending provider can leave customers with a negative perception of the brand, even if the decision is made by the lender. This can impact future purchases and customer loyalty.
The Case for Full-Spectrum Lending: Reaching All Customers
To mitigate these issues, merchants can benefit from offering full-spectrum lending solutions that provide options for customers across the credit spectrum—from prime to subprime. Here’s why full-spectrum lending matters:
1. Broader Customer Reach: Full-spectrum lenders are equipped to assess creditworthiness across a wider range of financial profiles, increasing approval rates and enabling more customers to access financing. This inclusivity can drive sales by expanding the pool of eligible customers, benefiting consumers who might otherwise be excluded.
2. Increased Sales Volume and Revenue: By offering multiple financing tiers, merchants capture sales that would otherwise be lost to declines. Full-spectrum lending doesn’t just convert more customers; it can also lead to higher average order values as customers are empowered to purchase bigger-ticket items.
3. Enhanced Customer Experience and Loyalty: Offering financing options for all credit profiles helps ensure that customers feel valued and accommodated, regardless of their credit score. A positive experience with a full-spectrum lending solution can increase brand loyalty, as customers are more likely to return to a merchant they trust to meet their financial needs.
4. Improved Brand Image: When merchants offer financing for everyone, they project a brand image of inclusivity and customer-centricity. This can foster positive brand perception, as customers view the merchant as proactive and understanding of diverse financial situations.
How Full-Spectrum Lending Reduces Declines and Builds Value
A core benefit of full-spectrum lending is the reduction in decline rates. By partnering with a POS lending partner like Enable Financing, merchants can ensure that more of their customers are approved for financing, regardless of their credit standing. Here’s how it works:
Tiered Financing Models: Many full-spectrum lenders use tiered financing models that assess credit and offer a range of solutions—from low-interest loans for prime customers to flexible payment plans for subprime customers. This maximizes approvals, ensuring that customers have access to financing suited to their credit profile.
Soft Credit Checks: Some full-spectrum lenders conduct soft credit checks, enabling customers to check their eligibility without impacting their credit score. This allows merchants to offer a seamless, low-risk financing process that makes customers more comfortable applying.
Flexible Payment Options: Full-spectrum lending often includes options like extended payment terms and flexible rates for subprime customers. By accommodating varying repayment capabilities, full-spectrum lenders empower merchants to serve customers with different financial needs.
Final Thoughts
When merchants adopt a full-spectrum lending solution, they’re investing in inclusivity and customer satisfaction. For consumers, this means broader access to essential products and services. For merchants, it means reduced cart abandonment, higher conversions, and a more resilient revenue stream. As POS lending continues to grow, merchants who embrace full-spectrum solutions are positioning themselves to better meet the needs of all customers, making every purchase journey smoother, more inclusive, and more successful.
Enable, Inc
25132 Oakhurst Dr Suite 206
Spring, TX 77386
P: +1 (888)-801-1736
E: sales@enablefinancing.com
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