Lenders focusing more on borrowers’ overall financial health

Posted: 15 October 2018 11:27 am

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Does your lender care about your financial wellbeing? Chances are it does.

Online lenders came together during the annual Lend360 conference in Chicago to discuss how they’re working to better serve their customers. With over 900 attendees from more than 400 companies, Lend360 hosted lenders from all across the industry.

Improving customers’ financial health was a major theme at Lend360 this year — rightfully so given the recent studies that nearly half of Americans don’t have $400 saved for an emergency. Many lenders showcased things like their latest underwriting technology, faster ways to deposit approved loan funds and better websites designed for an easier user experience.

Three lenders with particularly notable achievements include LendUp, Alliant Credit Union and Kabbage. Each demonstrates a long-term focus of putting borrowers first in the short-term loan, personal loan and business loan industries.

LendUp: Helps borrowers build savings

Taking out a short-term loan and building savings typically don’t go hand in hand. Many who turn to short-term loans need to borrow between $100 and $1,000 — cash they don’t have readily available in their savings. LendUp is taking strides to improve this financial gap.

As a small-dollar online lender, LendUp recognized that 78% of its customers had less than one month of expenses saved. So it started a partnership with EARN, a national nonprofit committed to helping Americans build savings. Eligible customers can open an account with EARN and receive up to $60 in matching funds during the first six months of saving.

Although helping customers build savings might sound counterintuitive for a business that offers small-dollar loans, LendUp believes a focus on the financial health of borrowers pays off in the long run. It also offers credit cards for people looking to build credit — and it appears that it’s been good for business.

Alliant Credit Union: Consistently offers a good deal

With the emergence of more and more fintech lenders, you may have wondered how banks and credit unions are staying afloat in a digital world. The answer is simple: Serve customers with what’s most important to them. Headquartered in Chicago, Alliant Credit Union is one of the largest credit unions in the country and a leader when it comes to credit union lending. It offers a variety of loans to more than 300,000 members across the US.

What sets this credit union apart is the consistency, transparency and simplicity of its loan offers. Jason Osterhage, chief lending executive at Alliant, says that it offers “better midprime rates” than many online lenders. If you’ve compared personal loans online, you’ve likely seen very similar starting APRs across the board — whether that’s 3.99% or 5.99%. But what many borrowers don’t know is that the lowest rates are typically reserved for those with high credit scores, low debt-to-income ratios and spotless credit histories. You could end up with an APR as high as 36% with some online lenders. In contrast, Alliant caps its personal loan rate at less than half that — making it a sound choice for borrowers with good, but not perfect, credit and a decent debt-to-income ratio.

You won’t need to sift through legalese to get offered good rates, either. Alliant’s APR range is clearly listed on its site, and there aren’t special requirements buried in the fine print to get the lowest rate. “Unlike other lenders that make it complicated to get the best rate, our terms and conditions are simple,” says Osterhage.

If you qualify for an Alliant Credit Union membership, want to take out a loan and value transparency, this credit union could be a good choice.

Kabbage: Makes it easy to access funds with a business line of credit card

The small business lender, Kabbage, cares about its customers’ financial health. It understands small business owners who need financing tend to have specific needs for how and when they get access to funds. For example, a business owner who regularly buys inventory at a local depot might prefer financing they can tap into at a moment’s notice. Kabbage launched a new feature to serve this need for existing customers: a card that draws from a customer’s business line of credit at time of purchase.

This isn’t what makes Kabbage noteworthy, though. This business lender found that customers actually borrowed less with the card because they didn’t need to plan days in advance how much money to withdraw from their line of credit to their business bank account. Customers could swipe the card to make a purchase and borrow the exact amount they needed. And though this means Kabbage makes less money off interest, the lender has kept the card feature available anyway.

Ultimately, Kathryn Petralia and Rob Frohwein, cofounders of Kabbage, decided that what benefits their customers will ultimately benefit the company. Small business owners know that taking care of its customers is important, and appreciate that a lender demonstrates this same value.

Moving forward

Borrowers have more loan options than ever. And those options are getting more and more competitive. As lenders focus on customers’ financial wellbeing as an industry standard, you’ll benefit from clearer loan terms, more educational resources and additional perks.

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