The rise of financial technology (fintech) companies is undeniable and student loan refinancing online is increasing. In 2014, Lending Club and OnDeck went public, and over 500 fintech startups attracted private financing.
In the student loan refinancing market, there has been a rapid expansion of lenders participating in the market over the last 3 years (from two to eleven lenders). There are also competitive loan products being offered by startups, credit unions, and banks alike. Why is this?
One major reason is that entrepreneurs and innovative financial institutions have stopped accepting the idea that personal finance customers value convenience over a competitive offer. Unfortunately for many years, this was not the case.
Banks traditionally valued customers at $10,000 or more because they understood that once they got the customer to open an account, often a checking or savings account, they would likely come back for the more lucrative products such as credit cards and mortgage loans. This model worked effectively because going to your local bank was the easiest, most comfortable solution at the time.
The lack of a student loan refinancing market was a prime example of this old attitude.
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Editor’s Notes concerning Online Student Loan Refinancing:
♦ CEO of Credible.com, Stephen Dash highlights how the entrance of fintech startup banks and peer-to-peer lenders has spurred on competition within the lending industry. This competition results in better loan options for students that are looking to refinance their student loans. The big banks are no longer the few and most viable student loan refinancing options available and this is great for students looking to borrow. In the last year, in the last year alone, the borrowing rate has lowered by more more than 100 basis point (to under 2% APR).
On top of that, online student loan refinancing companies are not asking for as much of potential borrower's personal information because they know that if they make things too difficult for borrowers they can easily find another lender. True customer service is becoming more important to lenders as a means to attract qualified borrowers in an increasingly competitive lending market.
♦ Even more exciting than the new student loan refinancing opportunities that are opening up for students is the fact that this is just the beginning. As more and more p2p lenders and startup banks enter the student loan refinancing market more under-served potential borrowers will have opportunities for student loans, debt consolidation loans and much more. And likely at very competitive rates.
♦ The student loan refinancing market opening in this way will help the next generation of entrepreneurs reach their financial goals. By lowering your monthly payments and/or interest rates, it allows you to proceed with your business plans and personal finances from more advantageous positioning. Being weighed down by student loan debt has stalled the plans of too many young people and even destroyed the plans of many. Fintech and online student loan refinancing is a welcome solution to this problem.