Solving the Student Loan Problem for International Students

U.S. international students

The most common and pertinent issue facing an international student looking to study in the United States is securing credit for various needs like tuition, credit card, and buying a car. The stress of settling in a new country coupled with finding the best loan option can be a daunting task. Nomad Credit realized there […]

U.S. international students

The most common and pertinent issue facing an international student looking to study in the United States is securing credit for various needs like tuition, credit card, and buying a car. The stress of settling in a new country coupled with finding the best loan option can be a daunting task. Nomad Credit realized there is a void with regards to helping international students and visa holders (H-1B, L1, etc.) find credible lenders, and vice-versa. Nomad Credit’s search engine provides comparable options for the credit seeker to compare and decide the best possible loan option for them. It functions as a pure marketplace.

International Student Analytics

The number of international students in the U.S. grew by 7.1% and crossed the 1 million mark in the 2015-16 academic year. China (328,547) is the biggest contributor followed by India (165,918), Saudi Arabia (61,287), South Korea (61,007) and Canada (26,973). In total, there are approximately 5 million international students around the world, and by 2025, the number is expected to reach 8 million.

Source: NewAmericanEconomy.org

Economic Benefit of International Students

Source: NAFSA.org

As per the latest NAFSA’s analysis, 1,043,839 international students contributed $32.8 billion and supported more than 400,000 jobs in the U.S. economy during the 2015-16 academic year. That means for every seven international students enrolled, three U.S. jobs are created.

Source: NAFSA.org

All of the above highlights the definitive impact international students have on the economy of the host nation. But the hurdles these students face in accessing credit is remarkable. Though they are a riskier credit bet as compared to local students, shutting down a multi-billion dollar market is just not feasible.

Introduction to Nomad’s Specialized Marketplace

Nomad Credit has its headquarters in Chicago and was launched in 2017. Founder and CEO Brian Hoffman initially launched a plain-vanilla education loan company, following SoFi’s footsteps. But soon the company’s focus changed from refinancing student loans to funding international students. It aims to find the right financial product for international students and/or visa holders currently or planning to live in the U.S. The main visa holders it serves are F1, J1, L1, and H-1B visas.

Prior to Nomad Credit, Hoffman worked as an analyst at Sagence, a management advisory firm. In the beginning of this year, the company managed to raise $125,000 in angel funding.

Business/Revenue Model

The underlying business matrix is similar to already established fintech loan marketplaces like Lending Tree or Credit Karma. Nomad gets paid from partner lending companies for providing leads or customers. Payment structure may vary as it also deals with lenders based out of the United States, but could include a percentage fee, fixed fee per customer, monthly fee, or fee per led. This flexibility in payment options is necessary for serving and partnering with multiple lenders in different parts of the world.

The company has invested its resources to help find international students find the right combination of lender, insurer, and other financial services depending on their needs. It uses a simple questionnaire focused on the school, degree, original location of the student, and other personal information.

Partners and Unique Selling Proposition

The young company has managed to stitch up multiple partnerships with 11 financial partners, 2 insurance companies, and one international payments company. Adding insurance to its list of services was a no-brainer as international students are simultaneously looking at travel, medical, and renter insurance.

Though there are established players in the overall education and marketplace segment, such as Credible and Lending Tree, what sets Nomad Credit apart from its competitors is its specialization on becoming the one-stop shop for international students. It is the only company that is directly dealing with the U.S. as well as Indian lenders and is in the process of onboarding Chinese lenders. Though there is little competition from traditional lenders in India, well-funded Indian tech startups like BankBazaar are also turning their attention to student loans.

Nomad Credit’s Ideal Customer

Though the company is only 4 months old, it has managed to generate a lot of interest among international students while website traffic has been increasing two- or three-fold every month. It uses various marketing tools in India like advertising through partnerships, using paid ads, and blogging, and will be adding a student forum soon.

Anyone from Asia or African country coming to the United States to get an advanced degree like MBA or M.Eng (Masters in Engineering) is a prospective customer. Lenders prefer students who are studying MBA or M.Eng because those are highly employable and lucrative degrees, and there is lesser chance of default.

Though the company is based out of the United States, it has consciously decided to serve the entire international student ecosystem and not just students looking to come to the U.S. It has originated a lot of loans for students from India going to Germany or Singapore for higher studies.

Future Headwinds and Goals

Sallie Mae funds almost 95% of the U.S. student loan market. This has stifled innovation and made it imperative that Nomad targets markets where government entities are not the biggest players in student loans. Massive markets like India fit the bill; there is a lot of potential as the majority of the market is still untapped. That is the reason why this young startup sees more value in going after Asian countries.

Once the company is able to establish a firm footing in India, it wants to further expand into China and Nigeria. It aims to form partnerships in more and more countries so that it is able to serve a wider range of the population. Moving forward, it wants to further improve its technology as well its products so that it can cater to people from different cultures with unique needs. Integrating multiple languages into the platform is an important step toward that vision.

There are roughly 5 million international students today. They have more than doubled since 2000 and represent a hundred billion dollar opportunity for the financial services industry, currently being overlooked due to the fragmented nature of the customer base. Nomad Credit has been able to envisage the power of uniting this global industry on one platform and with funding and proper execution can actually target one of the last few untapped pockets of the alt-lending industry.

Authors:

Written by Heena Dhir.

Allen Taylor

Wednesday February 22 2017, Daily News Digest

Marcus

News Comments Today’s main news: OCC addresses risk management for bank-MPL relationships. IFISAs dogged by further delays. Radial integrates with Klarna. Bitbond raises $1.2 mil. Today’s main analysis: Marcus marks the end of traditional banking. Today’s thought-provoking articles: 3 upcoming changes to private student lending. The Pulse of FinTech infographics. United States OCC establishes risk management expectations for bank-MPL […]

Marcus

News Comments

United States

United Kingdom

European Union

International

Australia

News Summary

United States

OCC’s Third-Party Risk Management Expectations for Bank Relationships with MPLs (Pepper Hamilton LLP), Rated: AAA

On January 24, the Office of the Comptroller of the Currency (OCC) issued a new bulletin, OCC Bulletin 2017-07 (Supplemental Examination Procedures for Risk Management of Third-Party Relationships). The stated purpose of the bulletin is to assist bank examiners in evaluating the third-party risk management practices of national banks and federal savings associations (collectively, banks). For the most part, Bulletin 2017-7 reinforces existing OCC supervisory expectations. In several notable respects, however, the bulletin breaks new ground, including by addressing relationships with marketplace lenders.

In establishing risk management expectations for relationships between banks and marketplace lenders in its new bulletin, the OCC is following the lead of the Federal Deposit Insurance Corporation (FDIC), which issued its own supervisory expectations for these relationships in late 2015. As in the case of the FDIC’s guidance, the OCC bulletin broadly defines the term “marketplace lender” to include any “companies engaged in Internet-based lending businesses (other than payday lending).”2 Specific examples of marketplace lenders stated in the OCC Bulletin include online companies that make small business loans, consumer loans, student loans and real estate loans.3

If a bank plans to contract with a marketplace lender to “perform some, if not all operational functions, including processing, underwriting, closing, funding, delivering, and servicing of loans,” OCC Bulletin 2017-7 requires the bank to have sufficient support “systems, controls, and personnel [in place] to adequately support the volume of planned loan origination, servicing, or collection activities.”4 In addition, if the bank is considering contracting with a marketplace lender to originate or purchase loans, the bank must determine whether the lender’s underwriting methods are “new, nontraditional, or different from the bank’s underwriting standards.”5 Finally, if the bank will be investing directly or indirectly in, or will be providing warehouse lines or other credit facilities to, any third-party lender, including a marketplace lender, the bank must determine whether the third-party lender’s underwriting standards are consistent with the bank’s own underwriting standards.6

Goldman Sachs’ Recent Move Marks The End Of Traditional Banking (Newsmax), Rated: AAA

At the end of 2016, Goldman Sachs launched a new online lending platform called Marcus. The move into online lending by one of the most successful investment banks in the world is a telling move for two reasons.

First, it’s a good indicator of the post-financial crisis banking industry.

Second, rising compliance costs—combined with over seven years of zero-interest rate policy from the Fed—was a bad environment for bankers.

Peer-to-peer lending has grown from nothing a decade ago to be a $26 billion industry in 2015. However, it still only accounts for 2% of the market for unsecured consumer credit.

Goldman Sachs is using Finacle, a software program owned by Infosys, to run the Marcus lending platform. With this software, Marcus customers will be able to fully customize their loan parameters within guidelines set by the bank.

Gone are the days of negotiating with a banker on loan terms. The Finacle software is fully automated and will process the transactions in real time. It’s a fully operational “bank within a bank” that only relies on approximately 200 Goldman employees, according to Bloomberg.

Marcus is not a peer-to-peer lending platform. Instead, Goldman will be making loans against its own balance sheet. This will give the bank more flexibility with setting competitive loan terms and fees.

According to a Morgan Stanley report published in 2015, the effective annual interest on the peer-to-peer lending platforms analyzed was on average 6.8% lower than those offered by banks.

All the while, P2P lending platforms have historical net annualized returns between 5% and 10%. Compare that to investing in a 5-year US Treasury note that yields less than 2% today, below the reported rate of inflation, and can you see why Goldman Sachs got involved with online lending.

3 Upcoming Changes in Private Student Lending (US News), Rated: AAA

In fact, the day after Trump was elected to office, the stock price for Sallie Mae Corp., a large student loan lender, shot up nearly double from $7.10 per share on Election Day to $12.47 on Feb. 15.

For prospective private student loan borrowers, here are a few expectations that experts say consumers may see in the next year or two as a result of changes at the federal level.

1. More lenders entering the private student loan market: Matherson says easing of lending restrictions will lead to more lenders entering the marketplace over the next two years.

Experts say large commercial banks that left the private student lending market after the 2008 financial crises may also return.

2. Interest rate hikes for both variable and fixed-rate private loans:The Federal Reserve is signaling that it’s on course to raise the short-term interest rate this year.

Lending experts say they expect to see a 1 percent rise in interest rates for private student loans over the next two years. Those increases, they say, will affect both variable and fixed-term rates on private education loans.

3. A growing number of start-ups offering income-shared agreements: Under an income-shared agreement or ISA, students use funds from an investor to pay for college and in turn agree to make payments based on a percentage of their income for a set period of time after they graduate.

Casey Jennings, chief operating officer at nonprofit 13th Avenue Funding, which works with low-income students, says clarification of the legislation will make it much easier for financial and educational institutions to enter this space.

Prosper Marketplace President Ron Suber Joins Unison as an Investor and Strategic Advisor (PR Newswire), Rated: A

Unison Home Ownership Investors, the leading provider of home ownership investments, announced today that Ron Suber, president of Prosper Marketplace, has become an investor in the company and has taken on a significant advisory role as the company is experiencing a period of unparalleled growth, opportunity and availability.

A financial services industry veteran, Suber brings to Unison a wealth of experience across multiple disciplines. As an influencer in the financial technology space, Suber will look to grow the home ownership investment category through his relationships with marketplace lenders, mortgage companies, realtor groups and banks.

LendIt Announces 2017 PitchIt Finalists (PR Newswire), Rated: A

LendIt, the world’s largest show in lending and fintech, today announced eight finalists for its fifth PitchIt @ LendIt competition. In partnership for the first time with 500 Startups, the world’s leader in investing and mentoring, and sponsored by Marqeta, PitchIt is a leading global competition for fintech startups to earn mentorship, endorsement and exposure to institutions, investors and broad visibility.

This year’s finalists were chosen from nearly 300 high caliber applicants covering all areas of fintech including insurtech, blockchain, payments, online lending, credit and artificial intelligence.

The eight 2017 PitchIt finalists are:

  • Nova Credit
  • StackSource
  • Alloy.co
  • Qwil
  • Aella Credit
  • Real Atom
  • Float Credit
  • WeTrust Platform

The finalists will pitch their concepts at LendIt USA 2017 on March 7 to a panel of judges from the venture capital community including: David Teten, ff Venture Capital; Kareem Zaki, Thrive Capital; Ben Malka, F-Prime; and Joel Monegro, Union Square Ventures.

Kabbage preps small business loan deal (Global Capital), Rated: A

Online small business lender Kabbage is marketing a $500m securitization of loans to small and medium sized businesses which will be used to refinance an existing deal from 2014.

Guggenheim is the sole lead of the $500m deal, which is expected to officially begin marketing to investors in the week of March 6.

Kroll Bond Ratings has assigned an A rating to the $370.37m ‘A’ notes, and BBB to the $79.37m ‘B’ notes.

Marketplace deals readied, with innovations (Structured Credit Investor), Rated: A

Kabbage is marketing its first marketplace loan ABS of the year and its second since inception. Meanwhile, SoFi is in the market with its second consumer loan ABS – SoFi Consumer Loan Program 2017-2 – backed by US$343m of consumer loans and comprising several elements that differ from its previous securitisation.

Kroll Bond Rating Agency Assigns Preliminary Ratings to Arcadia Receivables Credit Trust 2017-1 (BusinessWire), Rated: A

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to two classes of notes issued by Arcadia Receivables Credit Trust 2017-1 (“ARCT 2017-1”). This is a $213.137 million consumer loan ABS transaction that is expected to close March 6, 2017.

This transaction is the first rated securitization of prime unsecured consumer loans facilitated by LendingClub Corporation’s (“Lending Club” or the “Company”) proprietary technology platform supporting an online marketplace that connects borrowers and investors by offering a variety of loan products originated by issuing banks through the platform, www.lendingclub.com(the “Lending Club Platform” or the “Platform”).

Why big banks are helping financial tech startups (Tradestreaming), Rated: A

Finlab, short for Financial Solutions Lab, is an 8-month startup accelerator program funded by JPMorgan Chase and run by the Center for Financial Services Innovation. It just sent out its third call for applications from financial technology startups working on tools for underserved populations. It’s an example of how banks are now partnering rather than competing with startups — a trend that’s grown quickly over the past couple of years.

Finlab began two years ago, and winners get $250,000 of capital, one-on-one mentorship and networking opportunities. About eight or nine winners are picked each round. Winners participate in a series of workshops across the country on how to grow their businesses, including a session on regulation.

Big banks are likely to keep supporting these programs — not only for relationship building, but also because startups are working on areas major banks aren’t addressing, said Gilbert.

4 Real Estate Crowdfunding Trends You Should Be Watching (Forbes), Rated: A

Real estate is one of the fastest growing markets to take on the concept of crowdfunding and apply it in a new way.

Here are four emerging trends in real estate crowdfunding to watch this year.

  1. Regulation Brings Crowdfunding to Maturity. Today, crowdfunding has matured and investors are more intrigued than they are skeptical. This is due, in large part, to the JOBS Act and the enactment of Regulation A+. It legitimized the industry and it has been growing ever since.
  2. Foreign Investment in Real Estate Is Booming. According to The Guardian, a recent U.S. real estate study showed that Chinese investors have poured $110 billion dollars into the U.S. market in the last 5 years (both commercial and residential). This investment is set to double in the next 5 years. Because of foreign investment expansion in the U.S., it’s relatively safe to assume that a portion of those dollars will go into alternative funding options like real estate crowdfunding.
  3. Wealthy Millennials Are Investing Their Money Differently. However, with the influx of unicorn technology companies and the increase of millennial millionaires, the need to put their money somewhere is still very much on their minds. Real estate crowdfunding has the potential to help them share the wealth while staying true to their sensibilities.
  4. Crowdfunding for Retirement. Those considering real estate investing, especially through crowdfunding platforms, could potentially improve their rate of return with tax efficient strategies, more specifically IRA’s. Real estate crowdfunding platforms allow those saving for retirement to invest in real estate right from the golf course, with just a few clicks on their phone or tablet.

PeerStreet’s CEO Brew Johnson Talks Real Estate Crowdfunding Market (Forbes), Rated: A

The company was founded by former Google executive Brett Crosby and real estate attorney Brew Johnson. By the end of 2016, the company originated more than $200 million.

Johnson: The biggest differentiators between PeerStreet and other players are pretty simple: (i) our platform is very focused on one asset – first-lien debt. We think creating this focus at the outset is important in delivering value to users. And most importantly, (ii) we don’t originate loans directly to borrowers, but rather we aggregate loans from a distributed network of lenders, curate those loans, and then make it easy for investors to invest in them.

Johnson: We exceeded $200 million in origination volume by the end of 2016. Our KPIs are based on loan volume and quality.

Johnson: We maintain focused on our core asset: short-term, first position lien loans. Our data continue to show that this asset provides favorable risk-return profiles for investors, so 2017 is about growing our loan volume in order to serve even more investors.

Johnson: I think there are opportunities of various sizes across the industry. That said, a couple that I find particularly interesting are the potential implications for a more robust rating and credit scoring of alternative lending investments across platforms and those of creating a truly efficient secondary market or exchange that enables investors to seamlessly trade in and out of positions.

Misys Targets Offerings for P2P Lending (Intralinks), Rated: B

Traditionally focused on treasury and capital markets solutions, Misys revised its focus to include solutions that would allow banks to branch into peer-to-peer (P2P) lending, as well as an offering for machine learning that would detect anomalies in trading patterns.

Altisource’s Premium Title Announces Integration with LendingQB’s Loan Origination System (Yahoo! Finance), Rated: B

Premium Title, a national provider of title and escrow services, announced today its integration with LendingQB’s end-to-end, browser-based loan origination system (LOS). The integration can help provide customers with the ability to obtain title and settlement quotes faster, place orders with Premium Title and receive a title fee certificate guaranteeing fees for 30 days, all without leaving the LendingQB platform.

This integration, gives Premium Title clients the capability to experience a seamless and more efficient process within the LendingQB LOS platform. Lenders using LendingQB can receive an automated quote for title services and a title fee certificate guaranteeing title fees, which auto-populates into the LOS. LendingQB can also maintain the loan estimate and any adjustments in fees associated with the loan, assisting with TRID compliance and faster disclosure timelines.

United Kingdom

Innovative Finance Isas dogged by further delays (Financial Times), Rated: AAA

The Innovative Finance Isa was officially launched by former chancellor George Osborne in July 2015, putting peer-to-peer lending platforms — where individual investors are matched with interest-paying borrowers — on a level playing field with traditional savings and investment products which can be held within an Isa wrapper.

A year on, the FCA has still yet to grant the bulk of peer-to-peer lenders, including the three largest — Zopa, Funding Circle and RateSetter — the authorisation they need to launch an Innovative Finance Isa in time for the new tax year in April.

These three peer-to-peer platforms account for more than 40 per cent of the UK’s market share by loan origination, according to AltFi data, having lent nearly £6bn combined.

Chatbot savings app Plum partners P2P lender Ratesetter (Finextra), Rated: AAA

British AI-powered savings Facebook Messenger chatbot Plum is to start steering users that are willing to take on risk in exchange for higher interest rates to P2P lender Ratesetter.

According to Moneyfacts, the average UK rate on easy-access accounts is 0.15%, while the average return earned by RateSetter investors to date is 4.7%.

The money goes into users’ Plum savings account but the Ratesetter deal means that people can also now choose to earn a better rate – if they are willing to take on the associated risk.

Zopa Named Best Personal Loan Provider & Best Alternative Finance Provider at the 2017 British Bank Awards (Crowdfund Insider), Rated: AAA

Zopa, the UK’s very first peer to peer lending platform, announced on Monday it was named Best Personal Loan Provider & Best Alternative Finance Provider at the 2017 British Bank Awards.

This news comes just a few weeks after Zopa was named Personal Loan Provider of the Year at the Consume MoneyFacts Awards for the fourth year in a row.

Zopa recently announced it topped £2 billion in lending.  According to information provided by the online lending platform, as of today, the lender matched over 246,000 borrowers to 75,000 investors to provide access to capital in the form of loans.

RateSetter Borrowers Have Paid Back £1 Billion, Investors Have Earned £63 Million (Crowdfund Insider), Rated: A

Online lender RateSetter has said it has now collected £1 billion in capital repayments from borrowers since its first loan back in 2010. Overall, RateSetter has originated approximately £1.75 billion in loans while paying out £63 million in interest.  The average interest rate ranged between 3.1% on the Rolling market and 6.0% for the 5 Year market. In 2016, total lending was pegged at £668 million.

Awareness of P2P drops north of London (P2P Finance News), Rated: A

AWARENESS of peer-to-peer finance products among small- and medium-sized enterprises (SMEs) is at its lowest in the Midlands and the north of England, the British Business Bank (BBB) has revealed.

The figures, revealed in its latest annual Small Business Finance Markets report, showed fewer than 40 per cent of firms in the Midlands were aware of P2P lending, compared with almost 60 per cent in London.

Around half of firms in the south of England were aware of P2P, while just 40 per cent of firms in the north had come across it.

Despite the varying levels of awareness, the report found annual lending through P2P platforms increased by 34 per cent to £3.9bn in 2016. Business lending made up £1.3bn of that amount.

SME Loan Fund plans break with GLI in bid for scale (Citywire), Rated: A

The SME Loan Fund (SMEF +), the small directing lending investment trust set up by GLI Finance, plans to break ties with its founder in a bid to gain scale.

The trust launched in 2015 amid a boom in peer-to-peer lending launches, yet was able to raise just £12.4 million capital. Assets currently stand at £53 million, mostly from an initial portfolio of loans transferred by GLI Finance (GLIF +) as part of the launch.

The SME Loan Fund said that GLI had agreed to sell its 48% stake in the trust through a placing. Should the placing prove successful, the SME trust will switch management from Amberton Asset Management, 50% owned by GLI. If it is not, the board will propose the wind-up of the trust.

GLI Finance, an investment trust in its own right, said it would use the money from a share sale to repay a £14.9 million loan to strengthen its balance sheet.

Most board members of P2P trusts have skin in the game (P2P Finance News), Rated: A

THE MAJORITY of board members of peer-to-peer investment trusts have “skin in the game”, research has revealed.

Canaccord Genuity research has assessed the pay and investments of board members of investment trusts. The analysis included funds focused on the P2P sector.

It showed that the highest annual pay packet among P2P investment trusts is £50,000, taken by the chairmen of the Funding Circle SME Income Fund and Victory Park Capital (VPC) Specialty Lending.

Samir Desai, co-founder of the Funding Circle platform, who sits on the investment trust’s board, has put £152,775 into the fund.

This is the highest among its board members, followed by £110,349 invested by non executive director Frederic Hervouet. The Funding Circle SME Income Fund board chairman Richard Boleat takes the highest annual fee on the board at £50,000 and has invested £5,157.

The trust’s board members Jonathan Bridel and Richard Burwood, both non-executive directors, have also invested £5,157 and their annual fee is £40,000 and £30,000 respectively.

Desai does not take a fee and Hervouet has an annual fee of £35,000.

European Union

Radial payments platform integrates with Klarna (Finextra), Rated: AAA

Klarna, one of Europe’s leading payments providers, and Radial, the leader in omnichannel commerce technology and operations, today announced a new partnership to further expand Radial’s payment options.

The integration of Klarna with Radial’s Payment platform enables clients and prospects to offer a financing option at checkout to give customers more choice and could give retailers a 58 percent higher order value.

Financing a purchase over time has historically been optimized for brick and mortar stores. The online equivalent, however, can often be an ordeal, with redirects, lengthy forms and unclear information. Klarna’s process only requires a few fields of information, and lets customers know instantly if they qualify for the financing solution.

International

Bitbond raises $ 1.2 million to grow SME lending platform (Finextra), Rated: AAA

Global SME lending platform Bitbond today announced the closing of an equity funding round of $1.2 million (€1.1 million).

This round brings Bitbond’s raised equity capital to a total of $2.3 million.

Led by mobilike founder Şekip Can Gökalp, a number of business angels contributed to the round. Among them were Fyber founders Janis Zech and Andreas Bodczek as well as Kreditech co-founder & CEO Alexander Graubner-Müller.

Bitbond will use the additional funds for further product development and to grow its user base in markets which are underserved by traditional lenders. Over 1,600 loans worth $1.2 million were originated on Bitbond since its launch. 76,000 users from 120 countries registered with the service to date.

Infographics – The Pulse of Fintech – Q4 2016 (KPMG), Rated: AAA

According to The Pulse of Fintech, after 2015’s record-setting $46.7 billion in global funding to fintech companies, 2016 brought reality back to the market with an almost 50 percent slide in fintech investment.

Australia

Australia weathers fintech slump (The Australian), Rated: A

Global investment in fintech companies almost halved last year as “froth” comes out of the burgeoning industry and investors wait to see if they can successfully disrupt incumbents such as banks and insurers, according to a new report.

Fintech investment funding declined to $US24.7 billion ($32.17bn) last year from a bumper $US46.7bn in 2015, driven by fewer merger and acquisitions, and private equity investments, KPMG found.

However, the less mature Australian fintech industry bucked the trend as investment soared to a record high of $626 million last year, up from $185m in 2015 and $461m in 2014.

In contrast, corporate venture capital arms — those owned by banks and other incumbents — played a bigger role in the market, expanding investment to $US8.5bn from $US4.9bn. Australia’s institutions, including National Australia Bank, are increasingly investing in fintech via internal VC arms.

Authors:

George Popescu
Allen Taylor

How Student Loan Borrowers Compare Rates in Real Time

credible student loan refinancing

Considering the one-size-fits-all nature of the federal student loan marketplace and the augmented cash flow stability a borrower has once they graduate and start working, it’s astonishing that, before 2012, no financial institution offered a “credible” student loan refinance product for federal and personal student loans. Today, a range of lenders along with community banks, […]

credible student loan refinancing

Considering the one-size-fits-all nature of the federal student loan marketplace and the augmented cash flow stability a borrower has once they graduate and start working, it’s astonishing that, before 2012, no financial institution offered a “credible” student loan refinance product for federal and personal student loans. Today, a range of lenders along with community banks, credit unions, traditional banks, and alternative lenders have entered the student loan refinancing market.

It’s common sense that customers with traditional student loans will refinance if offered a product that helps them attain their financial goals, typically either lowering their interest rate or monthly payments. One such company is Credible.

The Rise of Credible Student Loan Refinancing

In the last three years, there have multiple entrants into the student loan refinancing market. With reports estimating the market potential for student loan refinancing to be over $200 billion, it’s no wonder. While there is only around $5 billion refinancing occurring right now, this alternative lending segment is poised for runway expansion.

Credible, headquartered in San Francisco, hit the scene in late 2012. After securing $2.7 million in seed funding from fifteen investors, the company raised $11.6 million in a Series A round led by Soul Htite, founder and CEO of Dianrong.com and co-founder of Lending Club, with participation from Prosper President Ron Suber and ConnectUp CEO/Founder Scott Langmack. Understanding the sustainable competitive advantage, multiple avenues of growth, favorable industry trends, and an enormous Total Attainable Market (TAM), investors opened their checkbooks once more for another $10 million in a recent Series B round. Investors included Suber, Regal Funds Management, and Carthona Capital.

Suber was effusive in his praise of the company, commenting that Credible has a talented, focused team that executes, and a passionate CEO.”

Credible plans to use this capital to accelerate the development of technology to help in leveraging data for growth.

Prior to founding Credible, CEO Stephen Dash was an investment director at M.H. Carnegie & Co. in Sydney, Australia. Before that, he founded Quickcharge Media, the largest network of smartphone battery recharge and digital signage kiosk in Australia.

Credible: The Kayak of Student Loans

Following its Series A financing, Credible entered the highly competitive personal loan segment. Borrowers are able to receive instant pre-qualified offers after a soft credit inquiry (that does not affect the credit score), which can be compared on a single dashboard. Most importantly, the platform lets borrowers control their personal contact information.

Credible does for student loans what Kayak.com does for airline fares. The California-based company provides a platform where borrowers can compare available rates. It’s based on the principle transparency to borrowers.

Unlike alternative student loan marketplaces that sell leads to lenders, Credible works by obtaining firm credit offers for its customers. This helps students assess and decide which loan option is best for them. Once a student is accepted to a university, all they (and their parents if required) need to do is go to Credible’s website and fill out a form. Credible then sends the relevant information to its lending partners.

Working with multiple lenders, Credible gets a fast and fixed quote on loans for that individual student loan and lets the student select the credit line that works best for them. The line of credit is legally feasible and set for 30 days. Rather than offer a variety of rates, Credible provides an actual loan and, once accepted, the transaction is completed. The company makes money by charging a transaction fee from the lender when the borrower accepts the credit line. Credible also offers a student loan refinancing product for graduates who want to lower their payments or interest rate on current student loans.

Credible’s Incredible Story: Past, Present, and Future

So far, Credible has managed to serve more than 130,000 customers since launch with 85,000 users qualifying for loan offers in 2016 alone. On average, Credible customers are able to save more than $18,000 over the life of a loan. The company offers simple and hassle-free eligibility criteria: The borrower must be at least 18 years old, be a US citizen, and have student loan debt over $5,000.

Staying true to their philosophy transparency, Credible launched its lender express pre-qualification engine to let borrowers see actual rates they will qualify for from multiple lenders in real time and without affecting their credit scores. The growing stature of the company can be measured by the fact that New Hampshire Education Loan Corporations (NHHELCO) has decided to partner with the company.

NHHELCO’s EDvestinU consolidation loan is available in all 50 states and lets students combine multiple student loans into a new loan with a lower interest rate and monthly payment. With this additional product, Credible now provides access to student loan refinancing options from seven different lenders: Citizens Bank, College Ave, CommonBond, iHELP, the Massachusetts Educational Financing Authority (MEFA”), NHHELCO, and the Rhode Island Student Loan Authority (RISLA).

The student loan refinancing opportunity is massive. More importantly, raising a Series B from the crème de la crème of the alternative lending industry is a big shot in the arm for Credible. Venture capitalists have been picky about their investments in the sector lately. Raising a Series B in this tepid environment proves that Credible is here to stay for the long run.

Authors:

Written With Heena Dhir.

Allen Taylor