consumer loan Archives - Lend Academy

Will Consumer Lenders Benefit from the Removal of Tax Benefits for HELOCs?

We discuss the changes to the home equity line of credit tax interest deduction with the new tax law.

January 8, 2018 By Ryan Lichtenwald Leave a Comment

Much has been written about the new tax bill as Americans try to figure out how their personal situation may be affected this tax year. Many people even made last minute changes in 2017 knowing that they would lose some tax benefits as we entered 2018. One change that we haven’t seen a lot of coverage on is the removal of the ability to deduct interest on home equity lines of credit or HELOCs. The exception is when the proceeds are used towards improving the primary residence.

HELOCs are used for homeowners to fund a wide variety of purchases. It is a way for homeowners to take advantage of the equity of their home and is especially attractive to some as we have seen a run up of home prices across the US. Since a HELOC is backed by an asset, interest rates are typically lower than an unsecured loan, such as the ones offered by LendingClub and Prosper. There was an added benefit to a HELOC with the ability to deduct the interest, something that differentiated HELOCs from pretty much all other loan products. Now that this benefit is, in many cases, removed with the new tax code, we may see homeowners opt for other loan types. It is important to remember that the interest deduction only benefited individuals who itemize their deductions, which tend to include individuals with higher incomes.

While HELOCs offer and likely will continue to offer favorable interest rates compared to other unsecured personal loans, there are also other fees to take into consideration. Often the bank charges closing costs on the HELOC which usually includes an appraisal. In addition, some HELOCs are variable rates and that may give pause to some consumers as we potentially enter an increasing rate environment.

Unsecured Lenders May Benefit

As the deduction benefit is removed, other options which offer a pleasant user experience look even better. Platforms like Goldman Sachs’ Marcus charge no origination fee and currently offer fixed rates as low as 6.99% for the best borrowers. Another player in the unsecured consumer lending space called LightStream offers loans as low as 2.49% depending on the use of proceeds. This could lead to the very best borrowers moving to products offered by these companies while borrowers with a less than perfect credit history, who would qualify for a higher rate, may rely on HELOCs.

Conclusion

We will have to wait and see to see how the new tax law affects the use of HELOCs going forward. If the amount of homeowners leveraging this product continues to decline, it will be a continuation of a trend we’ve seen since the financial crisis. If you currently have a HELOC and will no longer be able to deduct the interest in 2018 it may make sense to pay it off.

Note: If you’re looking to learn the intricacies on whether a HELOC is deductible or not as well as a thorough review of other aspects of the Tax Cuts and Jobs Act of 2017, I highly recommend this blog post from Michael Kitces.

How to Apply for a Personal Loan on SoFi

We walk through the entire SoFi loan application process with our accompanying how to video.

June 3, 2016 By Ryan Lichtenwald 1 Comment

The amount of options for consumer loans has increased considerably over the last couple of years. SoFi, one of the largest online lenders in the US started with student loan refinancing and has since expanded into personal loans and mortgages. In this SoFi review we will share the process of obtaining a SoFi loan and share a video of the entire process.

One thing to remember as you watch the video below is that it was recorded in late 2015 so the interest rates and the process may have changed slightly if you are going through this process yourself or looking at the SoFi website. For those who are just trying to better understand the online lender’s process, this video will give you insight into the experience that thousands of borrowers have already gone through with SoFi. The video is embedded below but is also available on YouTube.

One of the benefits of online lenders as shown above is just how fast they are able to pre-approve you for a loan. It is a very transparent process and the rates can be extremely attractive, especially for the very best borrowers. We have tried out many of the online lenders and one thing we found interesting is that SoFi has a unique approach to underwriting. So even if you have been declined by banks or any of SoFi’s competitors it is still worth checking to see if you might be approved for a loan with SoFi.

The other unique aspect of SoFi that is worth mentioning is their focus on building a community. While some benefits like their career services or entrepreneur program are only available to those who refinance student loans, SoFi also offers events in large cities for their members.

It was very interesting to see the SoFi borrower experience first hand. Obtaining a personal loan with SoFi is a straight forward process and if you are looking for a loan, SoFi is a company that is worth checking into. If you want to take a personal loan out at SoFi, you can use this link, which is our affiliate link.

How to Apply for a Loan on Lending Club

We walk through the entire Lending Club loan application process from start to finish including a how to video.

January 12, 2016 By Peter Renton 3 Comments

Note: APRs now range from 6.95% to 35.89% as of October 10, 2018

This is part of our semi-regular series where we take an in-depth look at the platform experience from the borrower side. A few months ago I took out a loan on Lending Club and I recorded the entire experience for Lend Academy readers. This was my second time applying for a loan on Lending Club, I first did this back in 2011 and you can read about that experience here.

Now, I didn’t actually need this loan from Lending Club, I just wanted to get a first hand look at their entire borrowing process. For investors I think it is important to have some understanding of the borrowing process, this is the core of what marketplace lending is all about and something few of us stop to consider. And for potential borrowers it is good to know how the process works before you apply for a loan.

When I was applying for this loan I created a screencast video of the process. This video walks you through the different screens and lets potential borrowers know what to expect. It runs just under six minutes and if you are looking to obtain a loan on Lending Club I highly recommend you watch the entire video. [Read more…]

Backed Offers New Take on Millennial Demographic

By getting 'backed', young borrowers will be able to get a lower interest rate by including a parent or sibling on their loan.

January 11, 2016 By Ryan Lichtenwald Leave a Comment

Backed is a new marketplace lending platform that launched in September 2015. Although there are many other young companies in the industry, we were intrigued by Backed’s approach to underwriting a niche demographic. They recently closed a seed round totaling $1.5 million from iAngels and Cyhawk Ventures. We had the chance to talk to George Popescu, CEO of Backed and Gilad Woltsovitch, Co-CEO and Head of Product at Backed to learn more about their product offering.

Backed hopes to serve millennials, which typically have a thin credit file and lack access to affordable credit. Gilad and George mentioned that in general someone under the age of thirty is not less reliable or more risky than someone over thirty. Over 63% of millennials don’t have a major credit card and 26% of young adults still live at home which makes it hard to underwrite an individual alone. This is where being ‘Backed’ comes in, which is the term they have coined. This is similar to having a co-signer on a loan, but there are some distinct differences. [Read more…]

How to Apply for a Loan on Prosper

We walk through the entire Prosper loan application process step by step including a how to video.

December 16, 2015 By Peter Renton 4 Comments

A few months ago I took out a loan on Prosper and I recorded the entire experience for Lend Academy readers. This was my second loan on Prosper, I first did this four years ago and I shared that experience as well. In comparing the process from 2011 to 2015 I can say that Prosper has made applying for a loan quicker and easier for potential borrowers.

I decided to borrow money from Prosper not because I needed a loan but because I wanted to get a first hand look at their borrowing process. This will be the first in a series of posts over the next few weeks where we share the borrower experience of various different platforms. For investors I think it is important to have some understanding of the borrowing process, this is the core of what marketplace lending is all about and something few of us stop to consider.

I have created a screencast video of the actual application process. This walks you through the different screens and lets potential borrowers know what to expect. It runs just over five minutes and if you are looking to obtain a loan on Prosper I highly recommend you watch the entire video.

Discover Your Interest Rate Quickly

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