Online Lenders

Marcus is trying to make its personal loan more enticing than debt consolidation

  • As the personal loan market gets competitive, lenders are getting more targeted in their customer acquisition strategies
  • Some companies are marketing loans as an add-on product to an existing product line, while others are highlighting specific use cases
Marcus is trying to make its personal loan more enticing than debt consolidation

Borrowers can now apply for home improvement loans from Marcus by Goldman Sachs.

This week Marcus added home improvement projects to the reasons for needing to take out a loan — a different direction for the Goldman Sachs startup that originally launched its product for people wanting to consolidate credit card debt at a lower interest rate. It has lent more than $2 billion on that messaging since October 2016.

Now, Marcus is announcing how to potentially use loan money — perhaps for some much needed home renovations — to make a boring financial product more exciting. When customers go to the site to apply for a loan they can select “home improvement” on their loan application. Its one-year-old personal loan  for home improvement projects is increasing the maximum to $40,000, the latest in lenders getting more specific in how they market to customer groups

While the company hasn’t put out an ad campaign for the update, it conceivably could make the product more appealing for aspirational potential customers and put a more positive spin on it than the company’s first messaging effort: to remove debt stigma.

“[Marcus] is going to help you understand that there’s more to you than this extreme amount of debt on your shoulders,” Marcus product manager Nicole Sbarra said last year.

Customers applying for a Marcus loan can also choose from debt consolidation, a major purchase, a special occasion, a vacation or moving and relocation when specifying why they need the money.

That’s as specific as it gets for Marcus though. Lenders typically have no idea why borrowers need the money for a personal loan or how they’ll use it. By contrast, lending company Affirm sees every transaction — who is buying, what they’re buying and where — and knows before giving the borrower the loan exactly how they’ll use it.

Home improvement loans present a large opportunity for lenders right now, said Craig Schleicher, senior manager of PwC’s consumer finance group. Banks have pulled back on the volume of home equity lines of credit so the market for unsecured personal loans is very competitive. The personal loan industry is in the middle of a large transformation. It’s shifted from being historically a branch-based business delivered by bankers to an online business and customers have never had more choice. Companies market loans to them as a way to help them meet short-term financial goals, get past speed bumps, or to stay financially afloat during tough times.

Other lenders are also slicing and dicing the customer markeitng. SoFi targets higher-earning customers and Elevate and BankMobile target the credit challenged, for example. Some companies, like SoFi or Wealthfront, try to get existing customers to take out a loan with them on top of the other financial services they already consume with the same company.

“For lenders still offering general-purpose loans, they’ll be more sophisticated about landing pages and optimizing the content around specific loan purposes,” he added.

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