Founded in 2006, Lending Club has been setting out to transform the traditional banking system with a credit marketplace that bypasses banks altogether. Those who require a loan apply through Lending Club, which evaluates their suitability and devises an interest rate accordingly. Lenders, who may include private individuals or organizations, then offer the money at the agreed rate of interest.
Now, in addition to personal loans and business loans, Lending Club is targeting those who have already borrowed money for a new car and are seeking better rates of interest. The service is being introduced in California only, with plans to expand it across the U.S. early next year.
How this translates into savings for consumers remains to be seen, but Lending Club reckons that its car refinancing loans will typically come with a 1 to 3 percent lower APR than the applicant’s existing loan, which should translate into an “average savings of up to $1,350 over the life of the loan,” the company said in a statement.
“Tens of millions of Americans borrow over half a trillion dollars every year to buy cars,” said Scott Sanborn, Lending Club CEO and president. “The practices and processes of the auto lending industry offer consumers limited options and a lack of transparency. This has created a gap between the rates consumers pay and the rates they might otherwise qualify for, unnecessarily driving up debt burdens.”
This is a notable evolution for Lending Club, as the move represents its first secured loan offering — that is, a loan that is secured against a physical asset such as a car. As with other Lending Club loans, those seeking an auto refinance loan can check their rate in advance based on their existing credit profile and means to repay the loan. Other factors that will impact the rate include things like the current value, mileage, and make / model of the vehicle.