Whether you’re a business offering financing options to consumers or you’re a consumer out looking for ways to pay over time for the things you want, you’ll be interested to know that financing programs are not static.
The old adage “Nothing is certain but death and taxes” rings true when it comes to lending options for consumer financing. Another you may be familiar with is “If you don’t like the weather, just wait”. But, in the world of lending, the more appropriate phrase may be “If you like your financing options, just wait!”
Whether you are offering or looking for financing as a way to pay for purchases over time, financing options are sure to change. Existing programs may be altered or eliminated altogether. New programs will come on to the scene, usually with the promise of great results. At the end of the day, it’s all about the cost of capital and the risk to deploy that capital, as in lending money to an individual.
To be clear, there are no silver bullets. On the one hand, if it sounds too good to be true, it probably is, and it most certainly won’t last. After all, it’s all capital being lent and that capital needs a return!
There appear to be three key factors affecting consumer finance and personal loan options in 2018:
- Rising outstanding credit
- More “fintech” lenders have entered the space
Rising outstanding credit sounds bad, but after the financial crisis of 2008-2009, households deleveraged. Some were forced to by banks slashing credit limits or closing card accounts down. Others became extremely cautious and took action on their own. So, we are coming off a much lower credit base. That said, higher credit levels per capita will make lenders more cautious in lending.
Deregulation should actually encourage lending and enable lenders to offer more flexible products. This may be riskier for them. But, for the innovators, it can also mean higher rewards.
Over the last few years, more “fintech” lenders entered the scene with innovative programs, including virtual credit cards and hybrid lending. It is healthy to see more capital available for consumer and patient financing. It’s also good to see new businesses creating lending programs that make lending more efficient – in the ease of matching individuals with lending options and in the application, origination, and servicing functions.
So, keep your eyes wide open. You can opt to pick a horse and hope for the best, or you can work with a firm that continually monitors and analyzes the entire field in order to provide you with the best lending options available at the time.
~ David Weyher