Credible, who describes itself as a multi-lender marketplace will now offer personal loans on their website. They will offer borrowers access to multiple personal loan options allowing borrower to make the best credit decision for themselves. Previously, they only offered private student loans and student loan refinancing. There are several things that make Credible unique compared to their competitors who also offer comparison shopping for loans. We talked to Stephen Dash, Founder and CEO of Credible to learn more about the company and their key differentiators.
Credible was founded in November of 2012 and officially launched their student refinance product in February of 2014. In May, 2015 they launched their student loan origination product. This product is for students with co-signers or parents for a private loan while in school. Stephen noted that about 15% of total student loan originations are private representing about $10 billion of originations per year.
One of the key differentiators with Credible is that they put the borrower in control. Personalized offers from multiple lenders are given to the borrower before the borrower’s personal information is sent to the lender. Thus, the borrower is not contacted until they opt-in by choosing an offer, which makes for a better customer experience. What’s interesting is for Credible’s student loan product, Credible is actually running the underwriting on their side for pre-qualification which means no information is shared with the lenders until the loan is accepted. Once this happens, the borrower is taken to the lender’s website where the loan application process is already started and there is no need to input information twice.
Credible also has a unique borrower acquisition strategy. Although they have a diverse range of channels, increasingly partnerships have become the largest. They have partnered with 70 membership organizations. This includes alumni groups, professional groups, blogs like NerdWallet etc. which means they have access to high quality borrowers who are often dentists, lawyers, doctors, accountants and teachers. Stephen noted that they are also in discussion with employers as well.
We asked Stephen why these organizations wouldn’t want to instead partner with a company like SoFi who offers both student loans and personal loans. Stephen stated that Credible wants their members to have access to more than one product and their membership is very diverse. These are national organizations with members in all 50 states that have different credit profiles, credit scores, debt-to-income ratios etc.
The director of the affinity program has two choices, they can partner with a single company or they can partner with a multi lender marketplace, giving their members a choice of multiple products. Ultimately the decision maker of the organization is opting for the latter because of the choice and simplicity. No one lender can offer the depth that a multi-lender marketplace lender such as Credible can. In 90 seconds, a borrower can have multiple offers which don’t just vary by interest rate, but can have combinations of fixed versus variable and span across many loan terms as well.
Expanding to Personal Loans
The expansion into personal loans is a natural addition to their product that many of their partner organizations were asking for in the Credible platform. Stephen provided a use case for a borrower through one of the organizations they partner with.
A young physician may be finishing residency. In this case, the individual is likely tapped out of federal loans and is earning $50,000. In order to finish residency, they need a loan to fly around, pay for hotel stays and other expenses. Instead of putting these expenses on a credit card, they can get a better interest rate through an online lender. A personal loan for that category is a great fit.
Credible is launching with five marketplace lending platforms: Prosper, Lending Club, Avant, Pave and Upstart. They are also in the process of vetting other lenders who are currently on the waitlist. We asked Stephen about the inclusion of a smaller lender such as Pave and he stated they they believe in choice. While most borrowers may go with the big three, there are borrowers who are right for these more niche lenders and they want to serve those borrowers.
As borrower acquisition continues to be the limiting factor for many online lenders it is nice to see Credible come in with a unique acquisition strategy and expand into personal loans. In my opinion this is a great model, which is very similar to that of Kayak for the travel industry. Lenders continue to spend on borrower acquisition. This model has already been proven as evidenced by the rise of LendingTree, who has seen their stock increase 100% over the last year. A portion of this is due to the increase of online lending platforms and getting paid for referring borrowers to the likes of Lending Club, Avant, BestEgg etc. Now, Credible can become another important referrer of borrowers to many of these leading platforms.