Lending Club will now offer auto loan refinancing, the company announced today. The product will first launch in California, with plans to expand nationally in early 2017, according Lending Club’s press release.
This is not the first time the San Francisco-based company has set its sights on auto. Former Chief Executive Renaud Laplanche said in February that the company had ambitious goals to “profoundly transform the way consumers access credit,” with plans for auto and student loans on the horizon.
“Tens of millions of Americans borrow over half a trillion dollars every year to buy cars,” Scott Sanborn, Lending Club’s current president and chief executive, said in the release. “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.”
Of the $1 trillion worth of the industry’s auto outstandings, only $40 billion is refinanced annually, according to the release, creating “huge potential” for the company. Lending Club also estimates that the average APR for borrowers on new loans through Lending Club will be about 1 to 3% lower than their current loan, translating into an average savings of up to $1,350 over the life of the loan.
“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,” Sanborn said. “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.”
Lending Club announced changes in mid-October to credit and interest rates for its personal loans, as part of an effort to increase its risk adjusted returns to investors — including charging, on average, 0.26% more interest for loans booked after Oct. 14, according to a company filing with the Securities and Exchange Commission. The changes were made after a particularly rough second quarter, during which the company originated $1.96 billion in loans — down about 29% from the previous quarter.
The new auto refinance product will be available for consumers for anywhere from $5,000 to $50,000, with an APR ranging from 2.49% to 19.99%, and terms from 24 to 72 months. There will be no origination fees, and, in keeping with Lending Club’s origination model, Web Bank will be the issuing bank. Although the initial offering in California will be available for borrowers with Ficos of 640 and above, the company said it plans to offer a full-spectrum product when it launches nationwide.
