A Look into Peer-to-Peer Auto Lending
Informal peer-to-peer auto loans are nothing new but have recently increased in popularity for used vehicles, especially for peer-to-peer sales as opposed to sales from a dealership, and lenders are looking for capabilities that formalize these transactions.
Historically, many people who needed a small, short-term loan to finance a vehicle purchase would seek out funds from their friends and family. However, borrowing money from friends and family can lead to strained relationships and additional, unexpected complications. In the past, this might be your only choice, but the advent of small bank loans and credit cards changed all of that, at least for the majority of people.
Now within the rising sharing economy, FinTech company innovations are empowering a more streamlined digital lending experience in both traditional and non-traditional lending. As with the payments space, peer-to-peer transactions are now entering the auto lending market.
What is peer-to-peer lending?
Generally speaking, peer-to-peer lending is the practice of loaning money, usually to unrelated borrowers, via non-traditional channels. An individual lender is matched with an individual borrower through a simple application process. For auto borrowers, peer-to-peer lending allows them to essentially shop like a pre-approved cash buyer without vehicle year, model, make, or seller limitations.
Why lenders should look into peer-to-peer lending
There are many pros and cons to offering peer-to-peer lending to your borrowers with the main pros of peer-to-peer loans being having a presence and offering products where your customers are shopping and your ability to price for risk for those loan seekers with bad credit, using the risk and fraud protections built into a traditional Auto LOS. Some cons that you should take into consideration are that these kinds of loans are unsecured which means that you cannot repossess a borrower’s vehicle if they should stop making payments.
Westlake Financial has announced that it will launch peer-to-peer lending this year. Citing that many borrowers are finding the vehicle they’re interested in is not being sold at a dealership, Westlake wants to begin facilitating non-dealership transactions for borrowers. The LoanCenter platform will connect the borrower with Westlake and two additional lenders. Longer-term, Westlake would like that auto lending relationship to grow into non-auto loans.
Want to facilitate peer-to-peer loans at your financial institution?
“Our Auto Loan Originations (Auto LOS) platform is flexible with configurable options that allow for the origination of all kinds of vehicle loans through a variety of channels,” says Scott Hendriks, Director of Product Management. “This speaks to the innovation and usefulness of Sagent products. We pride ourselves in being forward-thinkers, driving the market forward.”
Get a platform that can handle the origination and servicing of both traditional and non-traditional auto loans with Sagent Lending Technologies. What do you think of peer-to-peer auto lending?