Direct Lending Startup Outside Financial Launches With 3 Lender Partners

Outside Financial, a Midlothian, Va.-based independent auto loan marketplace, launched its direct lending platform today with three lender partners that provide a broad range of financing options for borrowers, President Sonia Steinway told Auto Finance News.

Steinway declined to disclose the name of their current lender partners due to publicity agreements, but Outside Financial looks to onboard additional lenders, following the launch, that share a consumer-first focus.

For now, the lenders currently utilizing Outside Financial’s direct lending represents a wide range of financing options for consumers in prime and nonprime. When a consumer applies for a loan through the newly launched platform, up to three loan offers will come up based on consumer customized term lengths, APR, and monthly payments.

“[Our lenders] represent a huge range of coverage, which is what we’re trying to accomplish in terms of serving our clients,” Steinway said. One area where Outside Financial sees many opportunities is with repurchasing and refinancing options for auto loans, especially in a rising interest rate environment.

The Federal Reserve already raised interest rates 25 basis points last month to a range of 2% – 2.25% — the third hike this year. The central bank is highly likely to hike rates again in December and three more times next year reported The Washington Post.

With interest rates gradually increasing, refinancing should be a more attractive option for consumers. However, it’s an option a consumer typically doesn’t know.

“If [a consumer] didn’t have a great credit score when they got their first auto loan, now they have a chance to do better,” Steinway said. “That’s something where we see a huge amount of opportunity and growth for consumers who are increasingly credit conscious.”

Transparency and education around auto financing options — like refinancing — is the overall goal for Outside Financial. “Auto loans are far less transparent than other loans like mortgages, to the detriment of consumers, and it’s reached a breaking point,” said Jon Friedland, co-founder, and chief executive, in a press release.  

On average, new car buyers are charged an estimated $1,700 in hidden markups when arranging their loans through a dealer, according to Outside Financial’s Markup Index data. 60% of consumers don’t know that they even have the option to bring their own financing to the dealership.

“Dealers are looking for areas to make a profit,” Steinway said. “Margins are compressed and now [dealers] are making more of their profit from F&I products and through the interest rate markup on ancillary products. Dealers are under no legal obligation to disclose that markup.”

For more content like this, check out the upcoming Auto Finance Summit 2018, October 24-26 at Wynn Las Vegas. Visit www.AutoFinanceSummit.com to register.