Defaulting on loans of any type can be devastating. Unfortunately, it is a reality many borrowers face, particularly for those who share in the $1.2 trillion student debt crisis. Time constraints, extenuating circumstances and mismanagement of financial assets can all lead to default on loans. However, lenders and borrowers may have a reason to sigh in relief: Alternative lending has seen a trend of less-frequent defaults when compared to traditional student loans. The probability of default on personal “IOU” loans – informal loans shared between friends with no intermediary – is close to 50 percent. Federal student loans, meanwhile, have an approximate 14 percent default rate. On the other hand, two P2P platforms in particular have stellar records of little to no loan defaults. Let’s dig a bit deeper.
Case Studies: CommonBond And SoFi
CommonBond, a P2P platform tackling the student debt crisis, had an unprecedented zero delinquencies and zero defaults as of June 2015. That came all while issuing more than $300 million in loans. CommonBond launched in 2011 and has raised nearly $200 million from August Capital, Tribeca Venture Partners and former Citigroup chief executive Vikram Pandit. SoFi, arguably the market leader in the P2P student loan refinancing space, also boasted zero defaults as of December 2014. The company has issued over $4 billion in loans to date and made CNBC’s annual Disruptor 50 list earlier this year. In contrast, the startling reality is this: 14 percent of federal student loan borrowers default within three years of starting repayment.
How Is This Advantage Possible?
For one, alternative models -- at least in limited cases -- have been more flexible than federal student loan repayment programs. However, eligibility requirements are often more stringent. SoFi, for instance, looks at salary and credit scores and will suspend payments in extenuating circumstances. Repayments naturally hinge on employment, and SoFi understands this contingency. “If you lose your job, we’ll temporarily pause your payments and help you find a new job,” the company promises. CommonBond has similar flexibility assistance by eliminating fees and penalties for refinanced loans and provides temporary forbearance for economic hardships. “We’re not here to place short term bets – we’re invested for the long haul,” CommonBond CEO and co-founder David Klein has said publicly.
Another Reason: Eligibility
Another reason default rates have remained so low within the P2P student loan lending space is that the platforms are restrictive to whom they lend. CommonBond equity investor, Tom Glocer, commented on CommonBond’s selectivity and its reputation for not “lend[ing] beyond the academic elite.” “Not to be glib about it, but if you’re coming to me for a loan and you’re a dentistry student at the University of Pennsylvania, I’ll be more willing to make a loan than if you tell me you’re an art history major at Texas Christian.” In looking at the average borrower, CommonBond’s Klein, threw out a few statistics:
Similarly, SoFi restricts those who qualify to participate on their platform. “Today, we’re able to offer significant savings and flexibility to US citizens or permanent residents who have graduated from a selection of Title IV accredited university or graduate programs, are employed or hold a job offer with a start date within 90 days, have a responsible financial history, and a strong monthly cash flow,” the company states.
The Bottom Line
Above all, it is essential to look at all available options before making financial decisions of any size. By increasing your financial literacy, you can insure that your decisions are well informed and cater toward your personal situation. When considering student loan options, consolidating and refinancing, the P2P space is booming with possibilities. Tackle debt by taking action.
Disclaimer: The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the suitability of any Even Financial product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any information or statistical data sourced by Even Financial through hyperlinks, from third-party websites, are provided for informational purposes only. While Even Financial finds these sources to be accurate, it does not endorse or guarantee any third-party content.
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NEW YORK, NY, March 15, 2022 -- Even Financial ("Even"), the category-leading embedded finance marketplace and independently managed subsidiary of MoneyLion, Inc. (NYSE: ML), has announced a new partnership with Tally, a leading financial automation company, to include the company's low-interest credit offerings on its platform.
"Tally has built a powerful tech-enabled system to help people solve one of the biggest financial problems today: paying off credit card debt," said Phill Rosen, Founder and CEO of Even. "We're thrilled to welcome Tally's line of credit offerings to Even's unparalleled network of financial services providers."
Tally is designed to help its members pay off their debt faster and save them money on interest and late fees. Members can lower their monthly payment with Tally's lower-interest line of credit, if eligible. Typically, at least a 580 FICO score is needed. Tally's system is customized to save people as much money as possible.
"Americans today owe nearly $1 trillion in credit card debt. We know from our research that many want to pay down their debt but struggle to get started. That's where Tally comes in," said Jason Huynh, VP of Credit, Analytics & Operations at Tally. "Our system combines financial automation with a low-interest line of credit to give people the help they need to get on track to pay off their credit card debt for good. We're thrilled that our partnership with Even will allow Tally to help even more people."
The launch of Tally on the Even platform enables consumers to get matched with Tally's custom, low-interest line of credit accounts of up to $25,000 in just a few minutes. After getting matched, eligible consumers complete the process through the Tally app. There are no out-of-pocket costs.
Tally is the latest partner to join the Even marketplace, a growing network of over 400 financial services partners and 500 channel partners covering a breadth of financial services including loans, credit cards, mortgages, savings, and insurance products. Even's marketplace technology enables any company to add financial products to its business, with full compliance and security, at scale.
About Even Financial
Even digitally connects and matches consumers with real-time, personalized financial product recommendations from banks, insurance carriers, and fintech companies on mobile apps, websites, and other digital touchpoints through its marketplace technology. Even's infrastructure leverages machine learning and advanced data science to solve a significant pain point in financial services customer acquisition, seamlessly bridging financial services providers (such as SoFi) and channel partners (such as TransUnion) via its industry-leading API and embedded finance marketplaces. Even enables any company to add financial products to its business, with full compliance and security at scale. Even was named one of "America's Best Startup Employers'' by Forbes for 2021 and was named to the 2021 Deloitte Technology Fast 500, which recognizes the fastest growing tech companies in the world. Learn more at www.evenfinancial.com.
Tally is a consumer financial tech company pioneering full-service financial automation to help people save money, pay down their debt and reach their goals sooner. Founded in 2015, the company built the first fully automated debt manager to help put billions of dollars back in people's pockets. In 2021, Tally was named to Fast Company's Most Innovative Companies list and to Quartz's Best Companies for Remote Workers. Previously, Tally made Forbes' Next Billion Dollar Startup list, Forbes' Fintech 50 list, and the app won Real Simple's Smart Money award. Learn more at meettally.com.
NEW YORK, NY, April 19, 2022 -- Even Financial (“Even”), the category-leading embedded finance marketplace and independent subsidiary of MoneyLion, Inc. (NYSE: ML), has announced it has now facilitated over $5 billion in consumer credit, as of March 2022. Leveraging machine learning and advanced data science, Even solves a significant pain point in financial services customer acquisition by seamlessly bridging financial service providers and channel partners via its industry-leading API and embedded finance marketplaces.
“Surpassing $5 billion in consumer credit facilitated through our marketplace is an enormous achievement for Even as we continue to help build the future of finance technology,” said Phill Rosen, Founder and Chief Executive Officer. “Access to credit has long been a challenge for many hard-working Americans, and we are dedicated to alleviating this issue by providing consumers personalized financial services offers that meet their needs, when they need it most. Reaching the $5 billion milestone reaffirms that our mission is driving significant value for both consumers and our partners."
Even has grown its embedded finance marketplace offerings beyond loans to cover a breadth of additional financial services including credit cards, mortgages, savings, and insurance products. Within loans, Even offers the largest network of premium, connected loan providers - across a wide array of products including unsecured personal loans, secured personal loans, line of credit, student loan refinancing, and auto loan refinancing. Leading financial services providers, such as LendingClub and SoFi, partner with Even to reach qualified consumers searching for loans, benefiting from Even’s unparalleled network and native integrations.
The company has continued its rapid growth trajectory in 2022, growing its network to include over 400 financial services partners and 500 channel partners. Even's marketplace technology enables any company to add financial products to its business, with full compliance and security at scale. Earlier this year, Even announced the close of its acquisition by MoneyLion, the award-winning digital financial platform, which will continue to advance their combined efforts of providing financial access and advice to hard working Americans.
About Even Financial
Even digitally connects and matches consumers with real-time, personalized financial product recommendations from banks, insurance carriers, and fintech companies on mobile apps, websites, and other digital touchpoints through its marketplace technology. Even's infrastructure leverages machine learning and advanced data science to solve a significant pain point in financial services customer acquisition, seamlessly bridging financial services providers (such as SoFi) and channel partners (such as TransUnion) via its industry-leading API and embedded finance marketplaces. Even enables any company to add financial products to its business, with full compliance and security at scale. Even was named one of "America's Best Startup Employers'' by Forbes for 2022 and was named to the 2021 Deloitte Technology Fast 500, which recognizes the fastest growing tech companies in the world. Learn more at evenfinancial.com.