The LendIt Fintech News team has a long history of posting reviews detailing the process for borrowers applying for loans through companies such as LendingClub and Prosper. The reality is that the online lending landscape today is much larger than those two fintech companies that dominated the industry ten years ago.
There are dozens of companies competing in the personal lending arena, from the big banks that have launched a new unsecured online loan or intend to do so, to the many successful fintechs we see in the ecosystem. today. While getting a loan online is nothing new in 2019, every consumer lender today offers a slightly different user experience and, most importantly, varying interest rates. Since we like to keep abreast of the current landscape, we are always delighted when borrowers are ready to share loan application details online. In this article, we take a look at the process of someone looking to consolidate about $ 10,000 in credit card debt.
One thing that many borrowers don’t realize is that you don’t necessarily have to go to every loan provider’s website to get a credit offer. Sites like Credit Karma and LendingTree work with many lenders, which can save you time finding the cheapest cost of credit. Below is a screenshot of this borrower’s Credit Karma account showing that they are pre-qualified for a loan through Prosper. This was just one of many options presented to this borrower.
You can see in the table below that this borrower was able to receive various offers with interest rates ranging from 9.47% to 13.99% and terms ranging from 2 to 3 years. The most important field here in this person’s situation is the overall cost of the loan, which includes interest and fees. While Prosper offered the lowest interest rate for this borrower, Lightstream was actually the cheapest loan due to the fact that it did not charge an originator fee. Note that Prosper’s offer was a three-year loan while Lightstream offered a two-year loan. Since this borrower planned to repay this loan aggressively within the next 4-6 months, the Lightstream loan was the best option. Other borrowers may appreciate the flexibility of having a longer term loan that Prosper and others have offered. Note that this borrower’s FICO score was around 720.
|Lender||Amount of the loan||Pre-qualified APR||Duration (Months)||Payment||Interest and fees||Phone calls?|
|SoFi||$ 10,000.00||10.60%||24||$ 464.22||$ 1,141.28||No|
|Lightstream||$ 10,000.00||10.09%||24||$ 461.86||$ 1,084.64||Yes|
|Prosper||$ 10,000.00||9.47%||36||$ 309.00||$ 1,472.00||No|
|Loan Club||$ 10,000.00||10.35%||36||$ 311.00||$ 1,608.00||Yes|
|Loan Club||$ 11,000.00||12.35%||36||$ 348.83||$ 1,557.88|
|Reached||$ 10,000.00||12.59%||36||$ 318.00||$ 1,954.00||No|
|Best egg||$ 10,000.00||13.49%||36||$ 326.00||$ 1,732.00||No|
|Marcus||$ 10,000.00||13.99%||36||$ 342.00||$ 2,302.00||No|
We also wanted to have an unbiased perspective on the actual user experience. Here’s what this borrower had to say about each business process:
- SoFi: The user experience was friendly. Problems with uploading credentials however. I must have tried several times.
- Lightstream: This is the loan I chose. The application was quick and the prices arrived during the day. The phone call I received was only to see if I needed anything more or if I wanted more information.
- Prosper: These rates were provided by Credit Karma. Prosper wanted me to review the entire application and submission of my IDs before setting a rate.
- LendingClub: I received several phone calls to verify my identity and needs, which I found annoying and redundant. Also, they called me and wanted me to check all my SSN / etc. that felt more like a phishing call and less like a customer service call.
- Happened: I wasn’t a fan of the 3-year term, so I didn’t pursue it.
- BestEgg / Marcus: Not Considered Due To Rates Provided On Credit Karma.
There has been a dramatic power shift in favor of consumers over the past few years when it comes to personal loans. Never before have consumers had so much information about the loan options available to them in a matter of minutes. What’s interesting is that the above list of unsecured loan companies is not exhaustive, there are many big banks and other fintechs that offer similar products. One of the things we are watching closely is how lenders and fintech banks go beyond offering a simple unsecured loan. When the borrower has transparency over many options, it becomes more important to differentiate themselves through the user experience and to serve clients throughout their financial lives.