Online consumer, student, mortgage, small business and real estate lending are all verticals that have been tackled by fintech firms over the last few years. Until recently we hadn’t seen much in one vertical: auto. Although it is the last category to be cracked, we’ve seen a lot of traction by several companies both in 2015 and 2016. This category represents a large opportunity not just for lenders, but also for technology service providers who power lending capabilities.

The largest fintech firm to make their way into auto lending recently is Lending Club. In October, 2016 they announced their auto refinance product. The product offering has now been expanded from loans offered just in California to a total of 27 states. We will have to wait and see how this product is received as it has only recently launched and Lending Club doesn’t break out auto originations. Lending Club claims that the average borrower can save 200 bps on their current auto loan.

Another company I find particularly interesting is Finova Financial. The interest rates charged by title loan companies can reach triple digits and the loan is backed by an asset. Not only is there room for innovation on pricing, but also on borrower experience as most title loan companies are brick and mortar retail establishments. Finova Financial provides an alternative with what they call a C-LOC or car equity line of credit. The company has raised $52.5 million and lets borrowers pay over 12 months, instead of over shorter terms offered by title loan companies. They aim to help borrowers build their credit as opposed to putting borrowers in a debt spiral which is often the result of traditional title loan companies. [Read more…]