PROCEDURES FOR APPLICATION
OF AUTOMOBILE LOAN DEFAULT PROTECTION
Automobile Loan Default Protection offered by Lenders Option Corporation, Inc. (LOC)
is selectively applied at loan origination according to the credit union’s loan policy.
Default Protection will reduce losses on repossessions or total losses from physical
damage by providing a wholesale purchase offer based on LOC’s stated values less
collision damage, mechanical defects, or $.08 per mile penalty in excess of 15,000 miles
annually. LOC’s purchase offers for repossessed vehicles are consistently higher than
bids or auction values. To further reduce the deficiency loan balance, LOC will pay a
principal balance reduction up to $5,000 calculated as the difference between and the
amortized principal loan balance at the time of repossession or total loss (less two
payments) and LOC’s stated value for the vehicle. If loans are paid off prior to maturity,
the credit union will receive a short rate refund by advising LOC of the pay off date.
Default Protection benefits to the credit union:
9 Additional C loan volume
9 Increased finance income
9 Increased yield from higher interest rate loans
9 Increased portfolio profitability provided by Default Protection loss reduction
Default Protection highlights include:
9 The program is applied to both new and used passenger cars and light trucks financed
up to a maximum of NADA retail for used vehicles or MSRP for new vehicles.
Dealer add-ons are not covered. Loan officers must include all vehicle accessories
when completing the Interim Order form. A copy of the NADA valuation should
accompany the Interim Order form. If an amount greater than NADA retail value or
MSRP is financed, claims will be paid based on NADA retail or MSRP.
9 The credit union selects, according to our loan policy, the loans on which to apply
Default Protection. The program fees are paid by the credit union and recovered
through an incr