Build the Best Loan Referral Program [+Tools]

Loan referral programs can help your bank, credit union, lending service, or fintech brand grow its network of borrowers through existing borrowers’ recommendations.

In this article, we break down:

• The benefits of starting a loan referral program for your bank or credit union
• How to know if you’re ready to start one
• Best practices for loan referral programs

Let’s go!

What are loan referral programs?

Loan referral programs encourage your current borrowers to refer potential new borrowers, in exchange for cash commissions or other rewards. Often, these referral programs also offer cash incentives to the referred lead, applied towards the new loan, to encourage them to take out the loan. 

Offer mortgage loans? You might also be interested in our mortgage referral program guide.

It’s a win-win-win: people searching for a lender get a recommendation from a trusted source, current borrowers can earn money towards their loan payment in exchange for recommending you, and you gain new leads who are primed to borrow from you.

Why start a loan referral program?

Starting a loan referral program can bring a wealth of benefits to your bank, credit union, or lending service:

Boosts brand awareness: Referral programs empower borrowers to spread the word about your loans This quickly and effectively increases brand awareness. When looking for loans, people might not have specific banks or lenders in mind. But if they’re referred by a peer, your name will be at the forefront of their minds – and will be remembered.

Increases trust in your loans: People trust referrals from peers far more than ads and other messages from your brand. A study by Nielsen revealed that 84% of people see referrals as the most trusted and influential form of advertising. 

Reliably creates borrowers: Thanks to that trust, referred leads are more likely to borrow from you. Social proof also plays a part – people will choose the loan option they see or hear about others selecting. And this creates warm, per-qualified leads who are more likely to sign your contract. Referrals are four times more likely to borrow than cold leads that come from other sources.

Cost-effective: Loan referral programs bring in new account holders at a lower cost than other marketing methods. Plus, you’ll only pay when you see results – you’ll only give out incentives when a referred lead takes out a loan.

Streamlines referral tracking: A referral program lets you track the word of mouth your borrowers generate in an actionable way, and use the data to improve your success. The best loan referral programs are automated with software, so it’s easy to track who was responsible for each referral. 

Are you ready to start?

While the advantages of a bank loan referral program are appealing, not everyone is ready to start one.

Before launching a refer-a-friend initiative, it’s essential to nail core elements. Having these foundational pieces in place will significantly increase the chances of your referral program thriving.

To begin with, you should have a solid base of borrowers. Your borrowers (or representatives of borrowing businesses) will form the core network that promotes your services to others, and a sufficiently large network is crucial for the success of your referral program.

In addition, ensure that you deliver exceptional customer service. A remarkable customer experience is the primary reason why borrowers will feel inclined to recommend you. You might consider surveying them about their experiences first to gauge their willingness to refer you to others.

Finally, it’s important to understand your target audience—your current borrowers.

• What are their demographic characteristics?
• Which platforms do they typically use to gather information? (e.g., specific websites, social media, television, radio, print)
• How do they prefer to communicate with their friends? (e.g., email, social media, text messaging)
• Why did they choose your loan services over competitors?
• What types of rewards would motivate them to refer their friends?

Understanding your existing customers will also give you insights into the kind of borrowers you want to attract. Many of your borrowers will share similar traits, so developing buyer personas could be beneficial.

Referral software for loan lenders [Free Tools]

These referral tools for loan lenders are a free and easy way to help you start your referral program.

Want a fully automated referral program for your loan business? Run your referral program with us at Referral Rock. Find out how we can build your program with you (and tailor it to your unique needs)

Best loan referral program tips

Follow these best practices to make your loan referral program a success:

Choose meaningful rewards

Rewards are the reason why people will refer others to your loans in the first place. They should be high enough that they reflect the value of a referral, but low enough that you can consistently afford to pay them out. Set too low of a reward and your customers won’t be motivated. But be sure the reward fits your budget, and is in line with (or lower than) your average cost per acquisition. 

The best loan referral programs give double-sided referral rewards. Give rewards to both the referrer and their friend – to the referrer as a reward for sending a new customer your way, and to the friend after they sign their contract or make their first payment. This motivates existing borrowers to refer, and new borrowers to sign on. Plus, it makes sure existing borrowers don’t feel like they’re “selling out” their friends just to get a reward. 

What sort of reward should you offer? For a loan referral program, a cash referral fee is king on both sides. This commission-based structure lets borrowers apply the cash towards their loan payment – or to any purchase of their choosing. 

If you want to guarantee that the referral bonus goes towards the loan, you can always offer the payment as credit – say, half off of their next payment. 

Some lenders choose to offer gift cards, as gift cards also let the awardee spend the money on whatever they please. This works well for business loan referrals, when the referrer isn’t the one who took out the loan. 

Think about different rewards structures

We recommend rewarding the referrer right away when one of their referrals signs a loan contract, and giving a reward for every successful referral someone makes.

However, depending on the specific actions you want new customers to take, you might also consider offering a second reward to the referrer once the new borrower makes their first payment.

This approach, where you provide rewards at various stages (when an account is opened and when value is generated), is known as a multi-step referral program.

That said, you don’t have to stick with a multi-step program. You could also implement tiered rewards that increase in value after a member refers a certain number of new borrowers

Alternatively, you might offer different levels of referral rewards – or different cash amounts – based on the type of account. For example, referrals for bigger loans (like business loans or home loans) could earn larger rewards relative to referrals for smaller personal loans.

Referral Rock is versatile enough to accommodate any reward structure you choose, including tiered rewards, multi-step rewards, and varying rewards based on loan values.

Learn more about how Referral Rock can assist you in optimizing your rewards >

Simplify the sharing process

When your program is simple to join and share, people are more likely to spread the word. Ensure that your customers can easily locate your referral program and share your loans with their friends. The sharing process should require minimal clicks or taps to access rewards.

Referral Rock’s One Click Access links simplify sharing, allowing your customers to start promoting you immediately. No need for borrowers to sign up for the referral program – they’re already part of it! Make sure to include these links in all communications about your referral program, including transactional and account update emails.

Discover how Referral Rock provides a seamless referral experience for your customers >

Keep the program’s terms straightforward. Break down the instructions into 3-4 easy steps. Make sure your program page is uncluttered, without too much text or distracting elements, and Include a clear, easy-to-find  call to action (CTA) that encourages sharing.

Include concise benefits of sharing (both rewards and intrinsic benefits), and clearly define when rewards are earned to avoid any confusion.

Give lots of sharing options

Allow customers to share through various channels. This flexibility enables them to promote your loans in the ways they typically communicate with friends.

For example, don’t restrict sharing to just referral emails. Offer options for sharing via social media, email, text message, and other platforms.

The best way to enhance your borrowers’ sharing options is by providing a referral link that they can easily copy and paste anywhere.

We also suggest preparing pre-written messages for referrers to send to their friends, so they don’t have to come up with their own wording. Ensure the message feels friendly and personal, as if it were written by the borrower themselves.

Pro tip: Incorporate the referral program into your loan payment portal. And if you’ve got a mobile payment app, consider integrating the referral program into your app for convenient sharing on the go.

Promote your program on various channels

Even if you develop a program that adheres to all the other best practices, it won’t be effective if no one is aware of it. 

The more program participants you have, the more successful referrals – and revenue – you stand to generate. So, it’s essential to promote your program and its rewards across all borrower interaction points.

Keep promoting your program consistently to ensure your borrowers stay informed. The most effective promotional channels are those that your borrowers see regularly. Here are some suggestions for promoting your program:

• Send out mass emails to all lenders about your program. We suggest sending dedicated emails monthly to quarterly to engage newer borrowers and keep the program fresh in everyone’s mind.
• Include promotions for your referral program in transactional emails, balance updates, newsletters, and other routine communications, with a brief call to action for referrals.
• Design a website banner or hero image that is easily visible on your homepage, linking directly to your referral landing page.
• Explore subtle promotion methods on your website, such as adding a link in the footer or menu. If customers can see and access it, they are more likely to join your program.
• Incorporate links to your referral program within your loan payment portal for easy access by regular users.
• Share posts about your referral program on your social media accounts. If you operate multiple branches, ensure each one promotes the program on their local social media platforms.
• Utilize Referral Rock’s Monthly Summary emails to keep members engaged by sharing a personalized overview of their activity each month.

Pro tip: Continually promote your program so your customers will instinctively use it when they want to tell their friends about your loans

Banks (and other loan services) with the most successful referral programs know a program doesn’t run itself. They’re promoting their programs consistently, on multiple channels. Referral program promotion is a long-term investment.

Ask for referrals at the right times

One of the best (and easiest) ways to get a borrower referral is simply asking outright. 

Timing is crucial when asking for referrals, though. Take advantage of moments when borrowers are happiest, and you are top of their minds. For example, we recommend asking when they:

• Post a positive review or social media comment
• Give you positive comments on a survey
• Provide excellent in-person feedback (or phone feedback)
• Recommend you to friends outside of the referral program

When asking for referrals, it’s important to show your client appreciation for what they’re potentially going to do for your business.

• Tell them you appreciate their decision to take out a loan with you.
• Explain the qualities that make them an ideal borrower and how this makes them ideal for referring potential new borrowers
• Avoid being vague! Ask if they know someone who fits the ideal profile and who could benefit from your loans
• Finally, provide a direct link to your referral program, making it easy for borrowers to take action.

Track referrals with the right software

With referral software tools, you can easily monitor how many referrals your borrowers are bringing in, identify the sources of those referrals, and swiftly distribute rewards. You’ll also gain valuable insights into your referral program, allowing you to assess its effectiveness and make necessary adjustments.

Additionally, referral software creates unique links, making it simple for people to share your program on social media and through email.

Referral Rock software simplifies the design, tracking, rewarding, and promotion of your program, making it an essential resource for anyone aiming to implement a successful loan referral initiative.

With Referral Rock, you can:

• Fully customize rewards: Select any reward type and structure you wish, including tiered and multi-step rewards.
• Track referrals seamlessly: Unique referral links for each customer let you track exactly where each referral came from. Plus, customers can track referrals they send with their own personal dashboards.
• Automate reward payouts: Send incentives right when they’re earned to keep customers happy. Automate multi-step payouts by connecting with your CRM.
• Automate promotions: Strategic, automated promotional emails keep customers engaged, and the passwordless links inside make sharing even easier.
• Integrate with key tools: Seamlessly integrate Referral Rock with over 50 tools, including your CRM.
• Collect program data: Measure your program’s success at a glance, and make informed adjustments and improvements.
• Set up quickly: Referral Rock lets you set up your program in days (not months), with expert support at every step.

Optimize your program

Use the data you gather to determine what’s working well and what you need to improve. Be sure to monitor how often people share, how often leads click, and how many referrals successfully translate to new loan contracts. 

Not seeing enough shares, reach or successful referrals? That means it’s time to promote your program more frequently, change up your rewards, or modify your program copy. 

Set up your own loan referral program 

A loan referral program lets you leverage the trust and influence of personal recommendations to attract new borrowers. The benefits of a referral program include easy tracking of referrals, increased awareness of your services, the acquisition of loyal clients, cost-effectiveness, and low risk. Be sure to set attractive referral rewards, promote your program regularly, and make sharing as easy as possible for borrowers. 

Find out more about how Referral Rock can help you build the best customer referral program >