COSTA MESA, Calif.– A first-ever study by J.D. Power on consumer satisfaction with personal loans suggests alternative lenders pose a “threat” in the HELOC market and reveals digital applications lead to better understanding and higher satisfaction.
The J.D. Power Personal Loan Satisfaction Study evaluates customer satisfaction with personal loan providers and explores the key variables that influence customer choice, satisfaction and loyalty based on four factors (in order of importance): interaction; billing and payment; loan offerings and terms; and application and approval process, the company said.
The Findings
Among the findings in the 2019 study, according to J.D. Power:
- Alternative lenders pose threat to HELOC market: Overall customer satisfaction with personal loan providers is 853 (on a 1,000-point scale). By contrast, the average customer satisfaction score among HELOC customers in the recent J.D. Power 2019 Home Equity Line of Credit Satisfaction Study is 834, with lower satisfaction correlating to fewer customer referrals, the company said.
- Customers perceive lenders as profit driven: “When rating brand image, customers have clear perceptions that all lenders are relatively profit driven, with significantly deeper concern among customers of alternative lenders,” J.D. Power said. Similarly lacking across the board are positive customer perceptions of reasonableness of fees and competitiveness of rates. Alternative lenders also rate significantly below their bank competitors in these two areas, the survey found.
- Digital applications lead to better understanding and higher satisfaction: Digital is the most common channel used for a personal loan application, with 40% of personal loan customers applying entirely online. Overall satisfaction is highest among personal loan customers in the digital-only segment (886), which also has the highest percentage of applicants who indicate that they completely understood the application (91%), according to J.D. Power. “A complete understanding of the application is associated with a 137-point increase in customer satisfaction.”
- Fast and efficient funding is critical: Receiving loan approval within two days is associated with a 55-point jump in customer satisfaction, and receiving funds within two days of approval is associated with a 50-point jump in customer satisfaction. By contrast, customers report the total average time for HELOC funding to be approximately 26 days from the time of application, J.D. Power reported.
- Customers will consider alternate products: Despite the reported benefits, customers choosing personal loans are still not locked in to the product when shopping for their loan. According to J.D. Power, nearly half (47%) of such customers also considered competing products; 28% considered credit cards; 17% considered personal lines of credit; and 13% considered HELOCs.
Marcus by Goldman Sachs ranks highest in overall customer satisfaction with a score of 899, followed by Lightstream (SunTrust) (887) and Upstart (873).
More on the study can be found here.