Shocked by the American student loan crisis, Australian Stephen Dash created Credible.com, a personal loan and student loan origination and refinancing marketplace that provides borrowers with actual rates from vetted lenders without worries about fees or their data being sold.
In the six years since its launch, Credible.com has facilitated more than $1.6 billion in loans and saved the average student loan refinancer $18,668 over the life of their new loan. But the Credible.com CEO now has his eyes on the greatest source of debt for most Americans — mortgages.
On Wednesday, his company announced the launch of its mortgage refinancing product in 20 states, which offers actual rates in three minutes from lenders such as Quicken Loans and United Wholesale Mortgage. Borrowers are then able to choose the best option and close the loan all without leaving Credible.com’s platform.
Dash sat down with Inman to explain Credible.com’s foray into the mortgage refinancing market, and how he hopes their model will revolutionize borrowers’ mortgage experience.
Q: Why has Credible.com decided to add mortgage refinancing to its product offering?
We’ve built the leading student loan marketplace in the U.S. and we did that by being a consumer champion, and by creating a borrower experience that was and is superior to anything that exists on the market. So, we’re tackling mortgages with the same approach that worked for us with student loans.
Rather than providing a rate range, a marketed range or estimated rates like a lot of lead gen sites (e.g. Lending Tree) that harvest and sell leads, which we think is fundamentally anti-consumer, we provide actual rates and we don’t sell consumer information.
We think there’s definitely room for a consumer-centric platform like Credible to enter the mortgage market, so it’s about taking our core technology and what we’ve learned from being in the student loan market and applying it to what is for many people in the U.S., their largest borrowing obligation.
Q: As you already know, mortgage rates have been steadily increasing, causing mortgage refinancing loan originations to drop to four-year lows. Are you sure this is the time for Credible.com to enter this market?
While mortgage refinancings have dropped, everything is relative. There remains very large demand for them. To give you some perspective, over 2 million Americans are expected to refinance $543 billion in mortgages between now and the end of 2019, according to Fannie Mae.
That’s half as much total outstanding credit card debt and a third as much as total outstanding student debt. And we know that over 75 percent of people refinancing only apply to one lender so they only get one actual rate. So they’re paying far too much in interest because they’re not shopping.
We know large numbers of people are making an important decision without getting all the information they need which is why we entered this market.
Q: So, what exactly makes Credible.com’s mortgage refinancing model different than other options currently available to borrowers?
The key highlights of our platform is that when a borrower comes to our site, we’re able to present them with actual rates from top lenders in less than three minutes. We’re giving them a real rate that is based on their personal situation, so there is no bait and switch, and there is no impact on a borrower’s credit score. Then the borrower is able to make an informed decision about which product and which lender they want to proceed with.
If they want to proceed with the product, they can close the loan all within the Credible.com platform. That’s a significant innovation in terms of the user experience, [and it’s] similar to a travel site like Kayak or Expedia where you go and buy an airline ticket. They’re not sending you off to the airline to go and purchase the ticket, you do it all within the platform.
We have automated so much of the origination process, so it really creates a seamless and pain-free process for the borrower. [They] can automatically link bank accounts, upload documents into our system, and get full transparency into where [they] are in the process and what’s coming next. And if [they] need to, we have licensed loan officers that borrowers can speak with.
So, we have built the platform, designed the platform, and engineered the platform as a consumer-centric experience, and I think the features I described are truly in the best interest of the consumer.
Q: It sounds easy enough, but what were the actual results borrowers experienced during the pilot period?
Anecdotally, one particular borrower ended up closing their refi loan in 21 days, which for the type of complexity of product is about half the time you’d normally expect to refinance a loan. So, our initial feedback has been very positive, but we’re always looking for feedback and improvement opportunities.
A couple of things that we’ve added through the pilot period is the ability to upload loan documents directly into the platform, the transparency as far as seeing where someone is the process and what’s coming next, and the ability to e-sign disclosures.
Of the people who came through and got 30-year rates through the pilot, the average spread of the offers they received was 85 basis points. Eighty-five basis points on an average loan translates to $25,000 of interest.
We think there’s a bit of an education process for consumers to understand that they’re potentially leaving tens of thousands of dollars on the table. Even if you save 25 basis points on the average loan, that can equate to around $15,000 of interest over the life of that loan.
These are small numbers because we’re in the pilot phase, but I think it’s really indicative of what people should expect to see.