Small dollar loans are up to 24 times cheaper at Oportun, which uses AI to assess credit risk and score 100% of applicants, new study finds
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SAN CARLOS, Calif., Nov. 2, 2021 / CSRwire / – Today, Oportun (Nasdaq: OPRT), an AI-powered fintech that gives hardworking people access to responsible and affordable lending, released the results the analysis of the real cost of a loan, conducted by the Financial Health Network. This new report shows that there is a need for low cost, low value loans. One solution is the type of AI-powered underwriting offered by Oportun that could dramatically reduce the cost of small dollar loans for hard-working people.
Among its findings, the study found that a $ 500 online-only installment loan can cost someone with a poor credit history or no credit history more than $ 2,400 in interest and fees over the life of the loan. ‘a loan. In comparison, a responsibly structured loan taken out using artificial intelligence (AI) and machine learning would cost just $ 102 in interest and fees, a savings of over 24 times.
The analysis, conducted by the Financial Health Network and commissioned by Oportun, provides an independent look at the lifetime cost of the various dollar loan options most readily available to people with bad credit or no credit history. Importantly, these comparisons are generally not available to consumers who are looking for loan options and affordability.
“The reality is that the people who need affordable credit the most often pay the highest amount in interest and fees,” said Matt Jenkins, COO and general manager of personal loans for Oportun. “This rigorous examination of realistic credit options for these households shows that the loan structure and the use of advanced technology in underwriting are important. We hope these results inspire other vendors to embrace best practices in product design and AI to help maximize accessibility and impact for hardworking people. “
In a separate study, the 2021 Health Expenditure Report found that low- and moderate-income families were spending $ 127 billion in interest and fees on alternatives that include the four products used in the analysis of the true cost of living. ‘a loan: credit cards, installment loans, payday. , and hire purchase. The True Cost of a Loan study used a proprietary model developed by the Financial Health Network to analyze pricing data and household income across states to find out how much a typical Opportunity customer would pay for loans of $ 500, $ 1,500 and $ 3,500.
The main additional findings include:
- Online-only installment and payday loans as well as traditional payday loans have all resulted in interest and fees totaling over $ 3,000 on a $ 1,500 loan, while credit cards and opportunistic loans cost both less than $ 500.
- A typical payday loan of $ 3,500 is the most expensive with $ 10,775 in interest and fees, while an opportunistic loan is the least expensive at $ 1,645.
- On average, Opportunity loans were 6 times more affordable than available alternative loans of equal amounts.
“It can be difficult for consumers to assess loan costs because credit products vary widely in their structures and fees,” said Marisa Walster, vice president of financial services solutions, Financial Health Network. “This rigorous analysis shows that responsible loan construction coupled with competitive interest rates can contribute to substantial savings for consumers. “
Oportun uses advanced data analytics, proprietary risk scoring, AI, and over 15 years of consumer insight to sustainably serve low and moderate income consumers responsibly, affordably, and at scale. Uniquely, this technology allows Oportun to score 100% of loan applicants with a high degree of accuracy.
Opportunity’s core product is a simple to understand, affordable, unsecured, fully amortizing personal installment loan with fixed payments and fixed interest rates throughout the life of the loan. Opportunity loans have no prepayment penalties or lump sum payments, are priced below 36% of APR, and range from $ 300 to $ 10,000 with terms of 12 to 48 months.
Since its founding, Oportun has successfully provided over 4.3 million loans and $ 10.5 billion in credit, mostly in the form of small dollar loans, saving clients over $ 1.9 billion in interest. and fees compared to other options generally available to people with little or no credit. the story. By reporting repayment performance to major credit bureaus, the company has also helped over 925,000 people begin to build credit histories.
Click here to download the report.
Oportun (Nasdaq: OPRT) is a financial services company that leverages its digital platform to deliver responsible consumer credit to hardworking people. Using AI-powered models that are built on 15 years of proprietary customer information and billions of unique data points, Oportun has made over 4 million loans and over $ 10 billion in affordable credit, providing its customers alternatives to payday loans and auto titles. In recognition of its responsibly designed products that help consumers build their credit history, Oportun has been certified as a Community Development Financial Institution (CDFI) since 2009.
Oportun (Nasdaq: OPRT) is a financial services company that leverages its digital platform to deliver responsible consumer credit to hardworking people. Using AI-powered models that are built on 15 years of proprietary customer information and billions of unique data points, Oportun has granted over 4 million loans and over $ 10 billion in affordable credit, providing its customers alternatives to payday loans and auto titles. In recognition of its responsibly designed products that help consumers build their credit history, Oportun has been certified as a Community Development Financial Institution (CDFI) since 2009.