As a consumer lending category with the fastest growth, outstanding balances for personal loans jumped by about 18 percent to $120 billion in the first quarter. And the percentage of loans originated by FinTech firms is growing astronomically: While they originated less than 1 percent of personal loans in 2010, they originated 36 percent of them in 2017, Bloomberg reported.
“A lot of credit goes to the FinTech lenders for reinvigorating a loan category that’s been around forever,” Jason Laky, TransUnion’s consumer-lending business lead, told Bloomberg. “If you think about ‘It’s a Wonderful Life,’ George Bailey and his bank offered personal loans to the consumers. It’s a core banking product that’s been around since the beginning of banking.”
Companies such as Prosper Marketplace Inc., Social Finance Inc. and LendingClub are a major force behind personal loan growth. LendingClub, for example, reported in a filing that personal loan originations jumped 20 percent from a year prior in the first quarter to $2.1 billion. And established banks are getting into the market through online platforms, too.
The news comes as Goldman Sachs has boosted its presence in the consumer lending market. And, according to American Banker, the New York investment bank also recently raised the maximum loan size from $30,000 to $40,000. Last October, Goldman launched Marcus by Goldman Sachs, an online platform offering unsecured personal loans to consumers. At the time, the company said creditworthy borrowers could apply for fixed-rate, no-fee personal loans of up to $30,000 for periods of two to six years.
“For many who manage debt payments on high-interest rate credit cards, a straightforward personal loan is a better solution,” Harit Talwar, head of Marcus by Goldman Sachs, said in a press release. “Marcus offers an option for consumers who are searching for a simpler alternative to credit card borrowing, where rates can change and multiple fees can be charged.”
Marcus has already lent out more than $2 billion, and in November, Goldman revealed that it can reach $13 billion in new consumer loans in the next three years through Marcus. Talwar also voiced concerns over the fact that the bank is getting deeper into the lending market at a time when consumer credit conditions could be declining.