The financing commitment is from MidCap Financial, a leading specialty finance firm, that is a subsidiary of the investment management firm Apollo Global Management.
This commitment will be used by MidCap to purchase up to $1 billion of student consolidation loans originated on the LendKey platform with potential further participation in the loans to be provided by investment funds managed by Apollo.
LendKey’s platform is currently used by more than 300 originators, including credit unions, community banks and other financial institutions. The platform has a slightly different model from a traditional P2P platform as it connects borrowers with local banks and credit unions. The financing commitment will enable LendKey and its lender clients to expand student loan refinancing programs and provide flexibility by giving clients options for liquidity and capital management.
"This transaction is a transformational event for the online lending industry. Apollo is one of the world's leading alternative investment managers and MidCap, along with the investment funds Apollo manages, are an ideal finance provider for LendKey. This commitment serves as a testament to LendKey's success in building a valuable student loan portfolio for our current customers and a validation of the ability of online lending platforms to directly originate high quality loans."
The student loan market is one that is continually increasing and student loan holders are increasingly in need of more refinancing options. Since 1999 student debt has increased by more than 500% and the average student loan debt is at an all time high of $33,000 per student.
James Zelter, Managing Partner and Chief Investment Officer of Apollo Credit, explained:
"We believe the financing commitment from MidCap will provide a much needed set of expanded opportunities for lenders and borrowers across the fast-growing student loan market. As credit unions and other financial institutions navigate the changing interest rate environment and contemplate potential Risk Based Capital (RBC) measurements, we believe LendKey is uniquely positioned to provide its clients with a facility to sell student consolidation loans and, in the future, other consumer loans. In addition, we believe this commitment is a great example of the inherent strength of Apollo's relationship with MidCap and our ability to source loans in a variety of attractive industries including student lending."
LendKey has so far provided $750 million for student loan refinancings, private student loans and home improvement loans. The platform’s loans are about $50,000 on average and rates are as low as 2.9%.
The platform also has a large presence in other areas of borrowing. In March LendKey partnered with TruCar, a negotiation-free car buying and selling mobile marketplace, to launch an integrated auto buying and lending program. The partnership will give consumers insight into pricing data and access to guaranteed savings as well as the ability to secure pre-approved financing automatically before visiting a dealership.
“Consumers are increasingly pricing cars online before visiting a dealership and now, for the first time, they will be able to receive quick, transparent and accurate information about auto loans before stepping foot into a dealership. This partnership allows us to combine TrueCar’s upfront pricing with LendKey’s pre-approved financing from our lender clients to make the process of buying a car more seamless for consumers.”