The Federal Reserve has finally pulled the trigger on its highly-anticipated first interest rate hike of the new tightening cycle. Although it’s unlikely that the conservative 0.25% hike will have a huge immediate impact on the financial world in itself, the implication that the recent hike will be one of a string of upcoming hikes could serve to change the lending landscape for both banks and alternative lenders.
Much of the boom in alternative lending has happened in a historically low zero-interest-rate environment, which means that alternative lenders are now entering uncharted territory.
Impact of rising rates
Perhaps industry analyst Julianna Balicka said it best in an interview with the Wall Street Journal when discussing the impact that rising rates will have on alternative lenders: “No one really knows.”
Certainly rising rates will ultimately put pressure on borrowers, but how much that will impact their ability to make payments or qualify for additional loans remains to be seen.
“We don’t think we are rate-sensitive at all,” said Renaud Laplache, CEO of LendingClub.
David Haber, CEO of online lender Bond Street agrees. “Marketplace lending will prove resilient to interest rate changes as our loan products are fairly short in duration (Bond Street loans are a 1-3 years term) so they do not have much rate exposure,” he said.
Prosper CEO Aaron Vermut takes alternative lending optimism one step further and sees opportunity in rising rates. “We expect to see greater consumer demand for options like Prosper as people look for alternate sources of credit over the next year that can provide more stable access to credit with fixed rates and terms.”
Alternative lenders maintain their advantage
In other words, Vermut argues…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
