LendingClub Corporation (NYSE: LC), America’s largest online lending marketplace connecting borrowers and investors, today released findings from two recent studies on member financial health and payment behavior before and during the novel coronavirus (COVID-19). Conducted in January and June 2020, the studies sought to understand member behavior before and during the coronavirus-driven recession and how they make decisions regarding prioritization of bills and expenses in relation to their long-term financial goals.
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The key takeaway: Customers are prioritizing personal loan payments over their credit cards. These findings support recent assertions from TransUnion suggesting that personal loan delinquency rates were either in line with, or performed better than, credit cards across most credit tiers during the Great Recession.
The findings show that:
- Despite their overall high levels of income ($90,000 average) and healthy credit profile (700 average), financial stress affected the day to day lives of 77 percent of members before taking a personal loan with LendingClub.
- In addition, 89 percent say personal loans helped them get closer to their financial goals.
- And, 90 percent of members surveyed say LendingClub has helped them save money on their existing debt, allowing them to start saving so they can live more comfortably, worry less, and pay bills regularly.
Furthermore, members overwhelmingly indicate that they are more likely to pay their LendingClub personal loan over a credit card because the personal loan “feels more impactful and important,” they “want to continue their progress toward financial health,” and feel that “taking a personal loan was an important step in that journey.”
Personal loans offer customers a fixed monthly installment and savings on interest, providing an end to the credit card revolving debt cycle plaguing Americans. Personal loans are one of the fastest growing asset classes within the credit industry, increasing from a $10 billion market in 2008 to $120 billion by the end of 2019. As the market leader, LendingClub helped responsibly build this asset class to offer affordable access to credit for borrowers while generating competitive risk-adjusted returns for investors.
“We’ve always believed in prudent underwriting and smart growth and this recession is allowing us to demonstrate the resilience of the personal loan asset class,” said Arun Sikka, Vice President of Lending Risk and Returning Member Experience, who has led the development of next generation lending strategies at LendingClub.
“Members are working hard to reduce spending, accumulate savings and stay on track with their bills,” continued Sikka. “Our payment rates reflect the importance of the LendingClub personal loan to their financial goals and the ability of our platform to adapt to a rapidly changing environment while we support our members through this uncertain time. That deep member relationship coupled with the strength of our digital underwriting and servicing capabilities positions us to see strong growth again as the unemployment rate levels off, borrowers graduate to a normal payment schedule and liquidity returns to the capital markets.”
Americans Want to Achieve Financial Health
Americans are craving financial stability and peace of mind as they work towards financial health. The studies indicate that members measure financial peace of mind by paying bills without getting back into debt (46 percent), not having to worry as much about money (24 percent), being able to retire comfortably (17 percent) and having enough to support family (13 percent).
Throughout the COVID-19 pandemic and subsequent economic recession, LendingClub remained focused on helping members maintain a path towards financial health. The company rolled out several tools and resources, including the launch of a new member center designed to support members as they manage their financial lives through this unprecedented time. Approximately half a million members visit this member center every month, which further validates members’ intent to repay their LendingClub loans.
“Financial health is important for all of our members regardless of why they come to LendingClub, which is why we launched specific tools like Credit Profile within the member center so members can understand what behaviors drive their overall credit,” said Ram Alagianambi, Head of Product, Membership and Repeats Lending at LendingClub, who has driven the launch and improvement of various functionalities of the member center platform.
“Credit Profile uses data to provide members with a guided experience of their financial lives, highlighting important credit decisioning and pricing factors like debt-to-income ratio, credit utilization and credit score,” Alagianambi continued. “This level of clarity and insight into their financial habits has helped members better manage their immediate financial needs today while improving their credit for a better tomorrow. Our job is to make it easier for our members to progress on their financial journey.”
To date, more than 200,000 members have signed up for Credit Profile and are actively using the product. Since LendingClub’s founding in 2007, it has facilitated over $55 billion in loans to more than 3 million members. Learn more about Member Center through LendingClub.
Methodology
LendingClub conducted two surveys and interviews with members in January and June 2020. Over 2,500 members completed the surveys and 8 members were interviewed by an in-house researcher. All surveys were developed and analyzed by LendingClub. Complete findings are available upon request.
