Considering the one-size-fits-all nature of the federal student loan marketplace and the augmented cash flow stability a borrower has once they graduate and start working, it’s astonishing that, before 2012, no financial institution offered a “credible” student loan refinance product for federal and personal student loans. Today, a range of lenders along with community banks, credit unions, traditional banks, and alternative lenders have entered the student loan refinancing market.
It’s common sense that customers with traditional student loans will refinance if offered a product that helps them attain their financial goals, typically either lowering their interest rate or monthly payments. One such company is Credible.
The Rise of Credible Student Loan Refinancing
In the last three years, there have multiple entrants into the student loan refinancing market. With reports estimating the market potential for student loan refinancing to be over $200 billion, it’s no wonder. While there is only around $5 billion refinancing occurring right now, this alternative lending segment is poised for runway expansion.
Credible, headquartered in San Francisco, hit the scene in late 2012. After securing $2.7 million in seed funding from fifteen investors, the company raised $11.6 million in a Series A round led by Soul Htite, founder and CEO of Dianrong.com and co-founder of Lending Club, with participation from Prosper President Ron Suber and ConnectUp CEO/Founder Scott Langmack. Understanding the sustainable competitive advantage, multiple avenues of growth, favorable industry trends, and an enormous Total Attainable Market (TAM), investors opened their checkbooks once more for another $10 million in a recent Series B round. Investors included Suber, Regal Funds Management, and Carthona Capital.
Suber was effusive in his praise of the company, commenting that Credible has a talented, focused team that executes, and a passionate CEO.”
Credible plans to use this capital to accelerate the development of technology to help in leveraging data for growth.
Prior to founding Credible, CEO Stephen Dash was an investment director at M.H. Carnegie & Co. in Sydney, Australia. Before that, he founded Quickcharge Media, the largest network of smartphone battery recharge and digital signage kiosk in Australia.
Credible: The Kayak of Student Loans
Following its Series A financing, Credible entered the highly competitive personal loan segment. Borrowers are able to receive instant pre-qualified offers after a soft credit inquiry (that does not affect the credit score), which can be compared on a single dashboard. Most importantly, the platform lets borrowers control their personal contact information.
Credible does for student loans what Kayak.com does for airline fares. The California-based company provides a platform where borrowers can compare available rates. It’s based on the principle transparency to borrowers.
Unlike alternative student loan marketplaces that sell leads to lenders, Credible works by obtaining firm credit offers for its customers. This helps students assess and decide which loan option is best for them. Once a student is accepted to a university, all they (and their parents if required) need to do is go to Credible’s website and fill out a form. Credible then sends the relevant information to its lending partners.
Working with multiple lenders, Credible gets a fast and fixed quote on loans for that individual student loan and lets the student select the credit line that works best for them. The line of credit is legally feasible and set for 30 days. Rather than offer a variety of rates, Credible provides an actual loan and, once accepted, the transaction is completed. The company makes money by charging a transaction fee from the lender when the borrower accepts the credit line. Credible also offers a student loan refinancing product for graduates who want to lower their payments or interest rate on current student loans.
Credible’s Incredible Story: Past, Present, and Future
So far, Credible has managed to serve more than 130,000 customers since launch with 85,000 users qualifying for loan offers in 2016 alone. On average, Credible customers are able to save more than $18,000 over the life of a loan. The company offers simple and hassle-free eligibility criteria: The borrower must be at least 18 years old, be a US citizen, and have student loan debt over $5,000.
Staying true to their philosophy transparency, Credible launched its lender express pre-qualification engine to let borrowers see actual rates they will qualify for from multiple lenders in real time and without affecting their credit scores. The growing stature of the company can be measured by the fact that New Hampshire Education Loan Corporations (NHHELCO) has decided to partner with the company.
NHHELCO’s EDvestinU consolidation loan is available in all 50 states and lets students combine multiple student loans into a new loan with a lower interest rate and monthly payment. With this additional product, Credible now provides access to student loan refinancing options from seven different lenders: Citizens Bank, College Ave, CommonBond, iHELP, the Massachusetts Educational Financing Authority (MEFA”), NHHELCO, and the Rhode Island Student Loan Authority (RISLA).
The student loan refinancing opportunity is massive. More importantly, raising a Series B from the crème de la crème of the alternative lending industry is a big shot in the arm for Credible. Venture capitalists have been picky about their investments in the sector lately. Raising a Series B in this tepid environment proves that Credible is here to stay for the long run.
Written With Heena Dhir.