The world’s largest marketplace lender Lending Club branches out into auto finance, launches first secured loan product.
Lending Club, the first major marketplace lender to go public, has launched a new auto refinance product. The launch marks the first time that Lending Club has offered investors access to secured loans through the platform.
The product will only be available to California residents in the first instance, but the company plans to expand nationally in early 2017. Lending Club will lean on its technology and expertise to allow car owners access to loans with “better rates, clear terms and no hidden fees”.
“Tens of millions of Americans borrow over half a trillion dollars every year to buy cars,” said Scott Sanborn, CEO and president of Lending Club. “The practices and processes of the auto lending industry offer consumers limited options and a lack of transparency. This has created a gap between the rates consumers pay and the rates they might otherwise qualify for, unnecessarily driving up debt burdens. We are excited to leverage our technology and core capabilities to put thousands of dollars back in consumers’ pockets.”
Auto finance already accounts for a significant portion of the loans written by Lending Club’s UK counterparts, such as Zopa and RateSetter. Indeed, auto loans are Zopa’s most popular loan type. Lending Club and other marketplace lenders in the US have to date focused mostly on refinancing credit card debt, but the company sees a great deal of opportunity in the auto finance space.
Lending Club claims that there is currently more than $1 trillion in auto debt outstanding, with only $40bn refinanced annually. The company estimates that APRs for auto loan borrowers who choose to refinance with Lending Club will be approximately 1-3 per cent lower than the rate of their existing loans. This should translate to savings of up to $1,350 over the lifetime of the loan.
Potential borrowers can use Lending Club’s new auto-refinancing portal to check their rate online, in less than a minute, based on their credit profile, ability to repay, and the make, model, mileage, and current value of their vehicle (the security). Borrowers can also use the portal to compare the cost of a Lending Club loan against that of their existing loan, and to calculate estimated monthly savings and total savings.
The loans themselves range from $5k to $50k in size, with 2-6 year terms, and APRs ranging between 2.49 per cent and 19.99 per cent.
Sanborn also weighed in on the impact for investors: “This is Lending Club’s first offering of access to a secured loan with an overall risk and return profile that’s complementary to the unsecured loans available through our platform. It’s a big step in the evolution of our platform, a win for consumers, and will give our investors access to another proven asset.”
After a turbulent year so far for the marketplace lending sector's largest platform, it's a positive sign for the industry that Lending Club is once again on the front foot.