In an attempt to rebuild its reputation, LendingClub is offering consumers who have car loans a chance to save some money.
The lending marketplace announced its plan to refinance car loans starting Tuesday. According to LendingClub
, it will refinance loans at an interest rate roughly 1% to 3% lower than consumers’ current loan contracts, which could amount to about $1,360 in savings over the course of the debt.
“This is Lending Club’s first offering of access to a secured loan with an overall risk and return profile that’s complementary to the unsecured loans available through our platform. It’s a big step in the evolution of our platform,” CEO Scott Sanborn said in a statement.
LendingClub’s decision to introduce auto refinancing comes at a time when car loans have reached new highs. Outstanding car loans surpassed $1 trillion for the first time in 2015, and grew steadily to $1.1 trillion by the second quarter of 2016, according to the Federal Reserve Bank of New York. Only $40 billion of those are refinanced annually, providing a large potential market to LendingClub.
Meanwhile, U.S. auto sales hit a record high of 17.5 million vehicles in 2015, according to Autodata. But more recent figures, namely the 1.4% drop in auto sales among U.S. consumers in September, suggests that a long-expected industry downturn is now underway despite strong sales, according to J.D. Power and LMC Automotive.
Chase’s CEO Jamie Dimon would agree. Dimon believes that the booming auto loan market is at risk for a downturn due to an increase in lending to subprime borrowers, or those with a FICO score of 600 or lower.
But according to Bloomberg, LendingClub plans to refinance loans of those with FICO scores above 640. The product will first be offered in California. And as a result, shares of LendingClub ticked upward by nearly 1.3% in trading Tuesday.
The company’s stock has been on a downward slide since its 2014. Shares of LendingClub were hit even harder earlier this year after founder and former CEO Renaud Laplanche resigned in May after an internal investigation found that LendingClub falsified documents when selling a $22 million package of loans to Jefferies. Laplanche was later accused of artificially inflating loan volumes.