Growing the loan book in 2021

Growing the loan book in 2021 will continue to be a challenge. Job insecurity and economic uncertainty means it’s harder to make lending decisions. Borrowers’ circumstances change so quickly due to Covid-19. And then there’s rising bad debt.

100,000 new borrowers

NestEgg will provide responsible lenders with 100,000 loan applications from new borrowers. NestEgg software will help lenders to grow their loan books in 2021 .

Loans will be pre-assessed according to lending policy. Covid-19 related alerts are triggered, for example, when income falls. Or when credit cards reach limits. Additionally, our app provides regular nudges. As a result, borrowers’ ability to repay their debts improves.

In 2021, our partner lenders will decision 250,000 loan applications worth £500,000,000. Responsible lenders using our software will save members £45 million in excess interest compared to high-cost creditors.

However, Covid-19 means this won’t be an easy task. Our survey of 500 credit union members found the pandemic is hitting a third of borrowers negatively. Moreover, this proportion is rising.

Avoiding the backward steps of Covid-19

NestEgg is a semi-finalist in Nesta’s Rapid Recovery Challenge. Therefore, we are working with responsible lenders and stakeholders to develop our software to help people recover finanially from Covid-19. Together we can help people avoid backward steps that deteriorate financial health.

Borrowers’ problems start with loss of income. Whilst waiting for tax credits or work, credit cards and overdrafts fund essential purchases. With reduced incomes, it’s hard to make credit repayments. Arrears accumulate. Credit scores tumble. Legal action may commence. As a result, it becomes almost impossible to get credit from mainstream lenders. Consequently, people turn to high-cost credit.

Decline to accept

Of course, lenders must decline applications. Money advice might be a better option. Borrowers, however, still turn to high cost credit. We estimate 20,000 borrowers declined by credit unions end up with high-cost creditors, each year. As a result, borrowers pay £5 million in excess interest annually.

But how many more end up with exploitative lenders after being declined by banks?

Responsible lenders may automatically accept many bank-declined borrowers. Credit unions and CDFIs want to help. Many more applicants are marginal declines. With a bit of work, these could be accepted within a short period of time.

NestEgg software helps lenders go this extra mile. Because of this, they can support people suffering financially because of Covid-19. It’s in their DNA.

Our software transforms data from credit files and bank accounts into three Financial Health Indicators. Borrowing, spending and saving. Uniquely, these are replicated in our consumer app and lender decision engine dashboard. This presents a shared view of financial health.

The direction credit risk is taking is also shown.

Applicants turned down for loans receive tips and advice. Credit alerts arrive regularly from the credit bureau. Because of this, users make the changes necessary to be accepted next time. Furthermore, goals are set against the indicators.

The purpose of these goals is to help people recover financially from Covid-19.

Join the recovery action group

The first Covid-19 Recovery Action Group is on 14 January.

Money advice professionals and responsible lenders will share how Covid-19 impacts low paid workers. Attendees will identify strategies for recovery for both lenders and borrowers. Participants will discuss encouraging banks to refer declined loan applications to responsible lenders.

It’s time to rise to the challenge of Covid-19. Thousands of new borrowers could benefit by using responsible lenders. This will help with growing the loan book in 2021.

 

About Adrian Davies

Adrian is a co-founder at NestEgg. He is an alternative finance and credit union expert with extensive experience of start-ups, business development, IT, Target Operating Models and regulatory compliance. Adrian has 20 years’ experience in the responsible lending sector, supporting credit unions with innovative ideas so they can grow and meet service user needs.