Student loan marketplace to branch out into mortgages

Online loan marketplace Credible has revealed that it is developing a multi-lender prequalification tool that could help users choose an appropriate home loan.

The San Francisco-based fintech, which raised $67 million in the largest ASX-listed tech public offering last year, spoke to Mortgage Business about its decision to branch out into mortgages. 

Credible founder and CEO Stephen Dash explained: “Historically, we had been in the student loan and student loan refinance business, but we launched a personal loans marketplace a couple of years ago and, most recently, we launched a credit card marketplace pilot at the end of last year.

“Now, we are looking to move into the mortgage market in the US, taking the same model and applying it more broadly across this bigger debt category in the US.”

The mortgage marketplace, which is still in development, will reportedly run in a similar fashion to the student loan marketplace.

By accessing “real data” from lending partners and layering that on top of data from credit bureaus and data provided by the user, the platform can provide a “highly accurate prequalification” rate from multiple different lenders.

A borrower can then choose which one is right for them via the marketplace (rather than individually). Once the platform has collected more information from the user, the borrower will then receive an offer of credit.

“Ninety-nine per cent of the time, the prequalification will turn into a firm offer of credit, a legal binding offer,” Mr Dash said of the student loan marketplace.

The final stage of the process involves signing the promissory note and uploading any supporting documents that are required with that offer.

Mr Dash told Mortgage Business: “We invented multi-lender prequalification [for student loans]. So that is step one, across multiple lenders. No one was offering that in the student loan category before we came. 

“That is a really good example of us providing something that lenders weren’t doing themselves and we were able to take something — filling out an application, going through a hard credit score — and deliver something to consumers that took a difficult process and delivered something in real time and did not impact credit.” 

He continued: “That process, generally, is the same process for the mortgage category, too, but obviously there is a lot more complexity in the user experience of getting a mortgage.”

However, the founder said that, “generally, there is overlap with a lot of the core technology that [Credible has] built around pricing engines and credit bureau integrations and CRMs and user flows”. 

Mr Dash added that the platform had been built to make it “as easy as possible for people to self-serve their way through” the process while receiving an “accurate rate”.

“We are really driving home on accuracy and personalisation of rate, which is what we think are the ingredients for having a frictionless and best-in-class user experience. It is something that is really differentiating compared to what else is out there in the market,” the founder said. 

“The traditional lead generation comparison sites can’t provide accuracy and personalisation to the level that we have done. We have taken this to the next iteration or generation… There are a whole host of features of the price comparison model that are not necessarily in the consumer’s best interest, such as selling leads multiple times, which we just don’t do.

“We’ve turned the model on its head.”

However, Mr Dash stated that as there is a regulatory requirement for loan officers to be involved in mortgages in the US, the system will not be fully automated.

“There is a human component required and, I think, in the short term, people will still want to speak to a human being [about their mortgage], etc.,” the CEO said. 

“[But] what we found on student loans was that the majority of people don’t want to talk to anyone… If you have a user experience where you are answering the questions of users and iterating on an ongoing and fast basis (for example, we might release a new iteration every week, while banks might release a new version of their website or update their user flows once every couple of years), that really drives improvement in the user experience.”

Mr Dash concluded: “I think it’s a gradual process, with people becoming more comfortable transacting online, and millennials (who are our main market on the student loan side) are obviously ahead of the curve because they are so used to shopping online or booking flights, etc. 

“So, I think it will happen quicker than we think, but I think into the interim, in the short term, there will be a hybrid approach where people will choose their own adventure — whether they want to talk to someone or self-serve, it will give consumers the choice, which is a critical part of it now.”

[Related: US lender tipped to enter Australian mortgage market]