Key Consumer Lending KPIs Every Lender Must Track

Bob Schulte
Jun 26, 2024
10 mins read
Key Consumer Lending KPIs Every Lender Must Track

As a consumer lender, the success of your lending institution is not determined by the number of borrowers you onboard but how well your institution performs in a competitive market. 

Having worked closely with lenders, I have observed how they measure their portfolios’ performance and optimize their strategies for maximum profitability. The key to their success is tracking the Key Performance Indicators (KPIs) and optimizing their lending strategies accordingly. 

I say they are the ‘key to success’ because these data-driven insights illuminate where you’re excelling and expose areas ripe for improvement. So, in this blog, I will share that wisdom with you. Here, I have listed the 11 most important KPIs that consumer lenders should track to drive sustained financial success.

Loan Portfolio Performance KPIs

  • Delinquency Rate (DR)

The delinquency rate measures the percentage of loans within a portfolio that are past due. It helps lenders assess the quality of their loan portfolio and the effectiveness of their credit risk management. It also acts as an early warning system for potential loan defaults.

A low delinquency rate indicates a healthy portfolio, while a rising rate suggests potential trouble. Lenders should set a benchmark for acceptable delinquency rates and take proactive steps, like early intervention programs, to address delinquencies before they escalate to defaults.


Delinquency Rate = (Number of Delinquent Loans / Total Number of Loans) x 100


If a lender has 100 loans and 5 borrowers are late on their payments, the delinquency rate would be (5 / 100) x 100 = 5%.

  • Loan Default Rate

This KPI reflects the percentage of loans in your portfolio that have gone into default, meaning the borrower has stopped making payments altogether, and the lender is unlikely to recover the total amount.

A low default rate minimizes losses and protects profitability. Effective risk assessment and underwriting processes are crucial to keep defaults under control.


Loan Default Rate = (Number of Defaulted Loans / Total Number of Loans) x 100


Let’s say a lender has a portfolio of 500 loans and experiences 10 defaults. The loan default rate would be (10 / 500) x 100 = 2%.

  • Loan Portfolio Yield (LPY)

This KPI measures the average return generated by your entire loan portfolio. It reflects the effectiveness of your loan pricing strategies.

A high loan portfolio yield indicates strong profitability. However, lenders need to balance yield with risk. Offering very high-interest loans might attract borrowers with lower creditworthiness, increasing the risk of defaults.


Loan Portfolio Yield = (Total Interest Income / Total Loan Amount) x 100


Imagine a lender earns $100,000 in interest income from a portfolio with a total loan amount of $1 million. The loan portfolio yield would be ($100,000 / $1,000,000) x 100 = 10%.

KPIs to Measure the Financial Efficiency of Consumer Lenders

  • Net Interest Margin (NIM)

This KPI is a key profitability metric for lenders. It measures the difference between the interest income earned on loans and the interest expense paid on borrowed funds.

A healthy NIM indicates efficient use of funds and strong profitability. Lenders can improve NIM by increasing lending rates, reducing borrowing costs, or optimizing their loan portfolio composition.


NIM = (Interest Income from Loans – Interest Expense on Borrowed Funds) / Average Earning Assets


Suppose a lender earns $5 million in interest income from loans and pays $2 million in interest on borrowed funds. If the average earning assets are $10 million, the NIM would be ($5 million – $2 million) / $10 million = 0.3 or 30%.

Curt Clemens, Founder and Owner of MegaCharts, a FinTech company says:

“In managing our loan portfolio, we meticulously track several key performance indicators (KPIs) to assess performance and optimize strategies. These include:

  • Loan Delinquency Rate: This metric measures the percentage of loans that are past due. It serves as an early warning signal for potential credit issues. By monitoring delinquency rates closely, we can identify trends, segment high-risk borrowers, and implement targeted collection strategies to minimize losses.
  • Net Interest Margin (NIM): NIM helps us gauge the profitability of our lending activities by calculating the difference between interest earned on loans and interest paid on deposits or borrowings. Optimizing NIM involves managing interest rate spreads effectively while balancing risk and return.
  • Loan Loss Provisioning Ratio: This ratio determines the adequacy of reserves set aside for potential loan losses. It’s essential for maintaining financial health and regulatory compliance. Adjustments in provisioning ratios are made based on risk assessments, economic conditions, and portfolio performance trends.

In addressing high default rates, we employ comprehensive measures to improve portfolio performance and borrower outcomes:

  • Enhanced Underwriting Standards: Strengthening credit evaluation processes to ensure loans are extended only to creditworthy borrowers. This involves rigorous assessment of income stability, debt-to-income ratios, and credit history.
  • Risk-Based Pricing: Adjusting interest rates and terms based on borrower risk profiles to align loan pricing with risk tolerance levels. This approach helps mitigate default risks while optimizing portfolio yield.
  • Data-Driven Decision-Making: Leveraging advanced analytics and predictive modeling to identify risk factors, anticipate borrower behavior, and refine risk management strategies proactively. This enables us to adapt quickly to changing market conditions and mitigate default risks effectively.”
  • Cost of Funds (CoF)

This metric reflects the average interest rate a lender pays to acquire funds used for making loans. It’s a crucial component of the Net Interest Margin calculation.

A lower cost of funds allows lenders to offer competitive loan rates and improve profitability. Lenders can manage the cost of funds by attracting low-cost deposits and optimizing their borrowing strategies.


Cost of Funds = Total Interest Expense on Borrowed Funds / Total Borrowed Funds x 100


If a lender pays $2 million in interest on deposits and other borrowings totaling $10 million, the cost of funds would be $2 million / $10 million = 0.2 or 20%.

  • Loan-to-Deposit Ratio (LDR)

This metric compares the total number of loans a lender or bank has issued (loan portfolio) to the total number of deposits it has received from customers. A ratio of less than 1 indicates the bank relies primarily on its deposits to fund loans. This can signify a conservative lending approach and potentially lower risk.

A ratio greater than 1 indicates the bank is issuing more loans than it has in deposits. This suggests the bank relies on borrowed funds to supplement its lending activities. This can be a riskier strategy, as the bank becomes more vulnerable to fluctuations in interest rates and the availability of borrowed funds.


LDR = Total Loan Amount / Total Deposits


Let’s say a lender has issued $8 million in loans and holds $5 million in customer deposits. The LDR would be $8 million / $5 million

Loan Collections KPIs

  • Days Sales Outstanding (DSO)

This metric reflects the average days your borrowers take to repay their loans after the due date. It essentially measures how quickly you collect cash from loans.

A lower DSO indicates faster collections and improved cash flow. Conversely, a high DSO suggests inefficiencies in collections or potentially risky lending practices.


DSO = (Accounts Receivable / Net Credit Sales) x Number of Days in the Period


Imagine a lender with an accounts receivable balance of $200,000 and net credit sales of $1 million for a month (30 days). The DSO would be ($200,000 / $1,000,000) x 30 days = 6 days.

  • Collection Effectiveness Index (CEI)

This KPI measures the effectiveness of your collections efforts in recovering outstanding receivables. It expresses the percentage of your total receivables that are actually collected as cash.

A high CEI signifies successful collections and a healthy portfolio, typically, a CEI higher than 85% is considered good. Conversely, a low CEI indicates challenges in collecting payments and potential losses.


CEI = [(Beginning Receivables + Credit Sales – Ending Receivables) / (Beginning Receivables + Credit Sales – Ending Current Receivables)] x 100


Let’s say a lender starts a month with $100,000 in receivables, generates $50,000 in new credit sales, and ends with $80,000 in receivables (including current receivables). 

The CEI would be [($100,000 + $50,000 – $80,000) / ($100,000 + $50,000 – ($80,000 – Current Receivables))] x 100. To calculate the final result, you’d need the value of current receivables.

  • Profit Per Account (PPA)

This metric measures the average profit earned per your collections team’s delinquent account. It helps assess the effectiveness of your collections strategies in terms of actual profit generated.

A high PPA indicates a successful collections strategy that generates profit even from delinquent accounts. Conversely, a low PPA might suggest ineffective collection methods or high collection costs.


PPA = Gross Profit from Collections / Number of Delinquent Accounts


A lender’s collections team recovers $20,000 in overdue payments during a month, with an associated gross profit of $5,000 after considering collection costs. If they handled 20 delinquent accounts that month, the PPA would be $5,000 / 20 accounts = $250 per account.

  • Promise to Pay Rate (PTP)

This metric measures the percentage of borrowers who commit to making a payment after being contacted by your collections team. It provides insight into the effectiveness of your communication and collection strategies.

A high PTP rate suggests successful communication and collection strategies that encourage borrowers to make good on their debts. Conversely, a low PTP rate might indicate a need for improved communication tactics or collection processes.


PTP Rate = (Number of Promises to Pay / Number of Collection Calls Made) x 100


If a lender’s collections team makes 100 calls and receives 60 promises to pay from borrowers, the PTP rate would be (60 promises / 100 calls) x 100 = 60%.

Ethan Keller, President of Dominion, a financial and legal advisors firm, says:

“PTP can be improved by using predictive dialers, centralized debt collection for efficiency, and leveraging analytics to schedule calls during peak engagement hours. Make sure your agents are equipped with customized scripts and maintain timely communication to encourage timely payments.

  • Communicate Actively: Providing regular reminders via email and making personal phone calls increases the chances of payment commitments. Personalized communication can improve customer experience and increase payment rates by 10-30%. To encourage timely payments, messages should be adjusted to individual borrower needs.

  • Paying Flexibly: Providing flexible payment options, such as installment plans or temporary payment reductions, can improve borrower commitment. Borrowers with flexible repayment plans made timely payments 20% more often than those without. Flexible payment terms allow borrowers to commit to and manage their payments more easily.”
  • Accounts Receivable Turnover Ratio (ART)

This metric measures how efficiently you collect payments from your borrowers. It reflects how many times your average accounts receivable balance is turned into cash during a specific period.

According to the National Association of Credit Management: NACM, lenders should aim to have this percentage as close to 100% as possible. This would mean that the lender’s collection team is able to maximize the cash flowing into the organization.


ART = Net Credit Sales / Average Accounts Receivable


Suppose a lender has net credit sales of $1 million and an average accounts receivable balance of $200,000 for a month. The ART would be $1 million / $200,000 = 5

Resource: For more detailed information on loan collection KPIs, read the guidelines provided by NACM.

Utilize Bryt Software’s Reporting and Analytics to Measure Consumer Lending KPIs 

Bryt Software’s reporting and analytics capabilities can be a valuable asset for lenders looking to track and measure the essential Consumer Lending KPIs discussed earlier. Here’s how Bryt can empower you:

Streamlined Data Collection and Integration:

Bryt integrates seamlessly with various accounting systems, eliminating the need for manual data entry. This ensures accurate and up-to-date data for KPI calculations.

Pre-Built Reports and Dashboards:

Bryt offers pre-built reports and dashboards specifically designed for consumer lending. These reports can readily display insights for key KPIs like delinquency rates, loan portfolio yield, and Net Interest Margin (NIM).

Customizable Reporting and Analytics:

Bryt allows you to create custom reports and dashboards tailored to your needs. You can define filters, group data by various criteria, and create drill-down functionalities for deeper analysis.

Real-Time Insights and Alerts:

Bryt provides real-time access to KPI data, allowing for immediate identification of trends and potential issues. You can set up alerts for critical metrics, enabling proactive intervention.

Improved Decision Making:

By having all your consumer lending KPIs readily available in Bryt’s insightful reports and dashboards, you can make informed decisions based on data, not intuition. So, go ahead and schedule a demo today!

Bob Schulte

About Bob Schulte
Bob Schulte, CEO, Bryt Software is the visionary leader behind Bryt’s groundbreaking approach to loan management. With 30+ years of experience in the SaaS industry and an impressive 25 experience years of education, Bob brings diverse SaaS expertise to the table. He is known for his innovative approaches and commitment...

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