Consumers are prioritising making personal loan repayments over credit cards during the financially stressful time of Covid-19, LendingClub has found.
The US peer-to-peer lending platform’s customers said they are more likely to pay their LendingClub personal loan over a credit card because the personal loan feels more important and they view it as a vital step in the journey towards financial health.
Despite their high levels of income and healthy credit profiles on average, 77 per cent of respondents taking out a personal loan with LendingClub said they are affected by financial stress, while 89 per cent said that personal loans helped them get closer to their financial goals.
The majority (90 per cent) reported the personal loans helped them save money on their existing debt, allowing them to start saving so they can live more comfortably.
“We’ve always believed in prudent underwriting and smart growth and this recession is allowing us to demonstrate the resilience of the personal loan asset class,” said Arun Sikka, vice president of lending risk and returning member experience at LendingClub.
“Members are working hard to reduce spending, accumulate savings and stay on track with their bills.
“Our payment rates reflect the importance of the LendingClub personal loan to their financial goals and the ability of our platform to adapt to a rapidly changing environment while we support our members through this uncertain time.
“That deep member relationship coupled with the strength of our digital underwriting and servicing capabilities positions us to see strong growth again as the unemployment rate levels off, borrowers graduate to a normal payment schedule and liquidity returns to the capital markets.”
LendingClub’s research found that its members measure financial peace of mind by paying bills without getting back into debt (46 per cent), not having to worry as much about money (24 per cent) and being able to retire comfortably (17 per cent).
In May, the platform launched its member centre, a hub of resources and tools to support its borrowers through the uncertain time caused by the pandemic.
One tool includes its credit profile designed to help borrowers manage their financial needs while improving their future credit.
“Financial health is important for all of our members regardless of why they come to LendingClub, which is why we launched specific tools like credit profile within the member center so members can understand what behaviours drive their overall credit,” said Ram Alagianambi, head of product, membership and repeat lending at LendingClub.