Goldman Sachs Bets on Personal Loans as 15.82M Take Out Unsecured Loans

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By Jacob Maslow

Goldman Sachs (GS) is taking a bet on consumer debt, as the number of people taking out unsecured loans soars to its highest level since 2009. The number of people taking out unsecured loans rose 15% in 2016, up to 15.82 million people.

The company’s head of the consumer lending arm, Harit Talwar, states, “People are embarrassed to talk about debt.”

Talwar states that a third of people with credit scores over 660 still have high interest credit card debt. The bank aims to offer loans of up to 6 years and $30,000 to consumers to help them pay off their credit card debt.

Debt consolidation through unsecured and personal loans allows for a collateral-free way to consolidate debt. Goldman Sachs’ average interest rate for personal loans is 12%, according to reports. The interest rate is 4% lower than the interest rate on most credit card debt.

TransUnion states that the average unsecured loan is $7,640, with the figure rising 4% last year. Personal loan balances reached $102 billion, surpassing the $100 billion mark for the first time ever in 2016. A strong economy is leading consumers to apply for a personal loan at an alarming rate.

The company states that the growing economy has led to a boom in personal loans. Unsecured loans are between the $3,000 ans $33,000 range for most Goldman Sachs clients. The company states that personal loans are often a placeholder for upcoming expenses.

Marcus, the company’s online personal loan platform, rolled out in October 2016. The platform allows for repayment terms of 2 – 6 years, with fixed-rate fees for creditworthy borrowers. The platform is a part of an ongoing process where the company listened to consumer feedback to create the platform.

The platform’s opening to a broader market allows for consumer-focused loans. Goldman Sachs’ Marcus platform started as a direct invitation platform.

Personal loan rates on the platform range from 5.99% to 22.99% APR. The platform relies on just 200 employees to run and is ran using the Finacle software for full automation. Real-time transaction processing is provided to allow for faster transactions on the platform.

The platform doesn’t charge sign-up or late fees. There are no prepayment fees either.

Reports from February suggest consumers are returning to higher household debt levels, with debt near 2008 levels. Total household debt in 2016 hit $12.58 trillion, with an additional $460 billion debt added in 2016.

Rising debt levels point to banks offering more credit to consumers as the economy improves. Bankruptcy filings dropped 4% in the final quarter of the year.

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