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Switch to Save - How Much is Enough?

Updated: Nov 18

Refinancing is a great way to help your Credit Union Members or to acquire new ones. But how much do you actually need to save your Member to motivate them to switch to your loan products?


In this piece, we examine 8,493 consumers who were offered savings through refinancing. We analyzed what “Offer” was enough to motivate an individual to switch his/her existing auto loan to a Credit Union product.


Naturally, we found some bias in this sample given that:

  • These are all individuals who expressed interest in saving money to begin with, i.e. you might expect these consumers' thresholds to take action be lower.

  • We only presented offers to consumers where savings were greater than $15 per month, i.e. we don’t have good data for “low savings” self selection.


Nonetheless, the study should give a good indication of “what it takes” to motivate someone to switch to your Credit Union.


On overview of the studied sample subset

The credit score average across the studied Members was 661 with a standard deviation of 81. For each individual applicant, the Clutch loan portal makes multiple refinance offers. Some of these offers may be higher APR (rate increases) but lower monthly payments because the consumer chose to extend the term of the loan.


In cases where both APR is higher and payment savings is less than $15 per month, the Clutch loan portal will not display any offers. The heat-map below illustrates average refinance offers made to our users with % APR savings on the x-axis and $ savings on the y-axis:

For the majority of offers, the end user ends up saving about $30 per months and 2% APR on their existing auto loans. For offers actually accepted, you can see the heat-map below shifts further outward and upward:

As you would expect, the likelihood of accepting an offer goes up with increased dollar and APR savings.


The average Credit Union Member owes $139k in multiple loan categories. If you as a Credit Union leader find a way to present all potential savings at once, you would not only increase “share of wallet” but you'd also maximize the likelihood that a Member takes action. So the natural next question is: how much savings are enough for a Member to take action?



Do we need to save Members dollars or APR?


In order to identify “how much is enough”, we examined the probability of accepting an offer based on the highest savings offers available to the consumer. The chart below illustrates how savings and probably for a Member to take action correlates:



A few interesting observations around dollar savings:

  • Even at (very) low $ savings (e.g. $0 - $30 per month) a certain subset of consumers take action. This is likely because this consumer subset is self-seeking auto loan refinancing. These consumers are therefore more likely to select into savings, even if they are small.

  • A subset of consumers don’t select obvious savings even at (very) high $ savings ($150+). At most, 75% of the studied consumers chose an offer. I.e. despite massive savings, a subset of consumers just don’t want to move ahead with getting a new or different loan.

  • Marginal willingness to switch auto loans plateaus between $75 - $100 monthly savings. Additional savings don’t seem to materially motivate consumers to switch.

  • Any marginal dollar saved between $0 - $70 monthly, in contrast, does seem to meaningfully increase the likelihood of someone choosing to move ahead.


APR impacts the probability of refinancing in a similar way:

  • At low APR savings, some users are still likely to refinance. Since consumers can extend their loan terms, low APR savings may still result in high $ savings on their monthly payments.

  • Marginal willingness to switch auto loans plateaus above 5.00%. Additional APR savings don’t seem to materially motivate consumers to switch.

  • Overall, we are observing that high APR savings are more predictive than high $ savings of whether or not a consumer is likely to switch his/her auto-loans.


We use basic logistic regression modeling to determine the predictive power of $ savings or APR savings - and/or their interacted effects. Although APR and dollar savings are interrelated, it seems that APR savings are a more powerful predictor than $ savings of whether a consumer self-selects into savings.


What does this mean for my Credit Union?


How can I as a Credit Union leader motivate a Member or prospect to actually make the switch? If we examine just savings, the answer is straightforward:

  • Target savings above $75 per month. If the auto loan alone doesn’t get a consumer to $75 savings per month, examine other elements on the credit file (credit card balances, personal loans, student loans) in order to “reach the target”.

  • Consumers think in APR savings and $ savings. You’ve got to be able to offer both, i.e. APR and $ savings in order to truly compel to refinance. Stretching the term of a loan alone neither motivates consumers enough nor does it align with the Credit Union's goal, i.e. maximizing share of wallet.


Our next piece will examine how big of an opportunity current Credit Union turndowns could be. And as always, if you’d like to discuss potential solutions and how digitized lending experiences can help, feel free to reach us out at contact@withclutch.com.