Lending platform Earnest wants to help millennials manage their finances. To build out its offering of loans and other financial management tools, the company has raised $75 million in funding, plus $200 million worth of loan capital from New York Life.
Battery Ventures led the round, which saw participation from Adams Street Partners and Maveron. The funds will be used to fuel 200 new hires, including new marketing and sales professionals, as well as engineers and designers.
Following its launch last year, Earnest came out with two products: loans for coding academic tuition and consumer loans. But the company’s defining feature has been a big data-fueled lending engine, built from the ground up. Earnest delivers loan rate estimates in under two minutes, using a variety of data, including information about bank accounts, credit cards, education, and jobs, as well as social media data, and around 100,000 other data points. It essentially relies on everything except credit scores to determine loan eligibility.
Earnest promises low annual percentage rates, an offer it can afford thanks to the reliability of its borrower assessments, as well as the relatively low costs associated with running an Internet business rather than a storefront bank. At last check, the company was advertising variable loan rates as low as 1.9 percent and fixed rates starting at 3.5 percent.
The company has plans to apply these rates to even more financial products. In January, Earnest rolled out a student loan refinancing program to help reduce the burden of these often costly long-term loans. Now, it has plans to launch a mobile app before the end of 2015.
While technology remains a large component of Earnest’s overall platform, chief executive and founder, Louis Beryl, said cultivating relationships with consumers has been key to the startup’s strategy. He said he wants Earnest to become the bank that consumers turn to throughout their lifetime.
That attitude is in stark contrast to peer-to-peer lending platforms, which also use large swathes of personal data to connect consumers with lenders. The big difference is that peer-to-peer lenders offer a transactional service. There’s no opportunity to develop a relationship with a given lender on Lending Club, for example.
Earnest’s relationship-based approach to lending seems to be working. In the last year and a half, the company has seen rapid expansion. It went from processing $8 million in loans at the end of 2014 to lending between roughly $2 million and $5 million daily. And Beryl plans on launching additional financial products in the coming year, though in our interview he declined to specify what those products would be. Rather, he talked broadly about his vision for Earnest.
“I would say it’s the purpose of a bank to help people realize their hopes and dreams so they can be able to go to school, buy a home, maybe purchase a car, and borrow money in a time of need,” Beryl said. “We want to expand to really be able to serve professionals over their whole lives.”