A new Dan Gilbert company is offering online personal loans from as little as $2,000 to $35,000, expanding the Quicken Loans founder’s reach in financial services from mortgages into consumer lending.
RocketLoans went online Monday, launched by Rock Holdings Inc. with 22 Detroit employees.
The service aims to complete personal loans in as little as eight minutes, said Todd Lunsford, RocketLoans CEO. The majority of the loans have been automated completely online.
“We definitely have originated loans and it’s going as smoothly as we hoped,” Lunsford said Tuesday. Less than 30 percent of the loans processed needed to be referred to a related call center for additional information, he added. “We funded the majority of them with no human interaction.”
The venture is led by Lunsford and Bill Parker, both veteran executives of Quicken. The company was formed in January 2015 and built the technology over the year, internally testing it in November by offering loans to employees of Gilbert-related firms.
“We got some tremendous feedback just from internal team members, and made more usability changes in the last 60 days than we made in the first nine months,” Lunsford said.
The application process authenticates each borrower’s identity and financial information through a series of third-party databases, performing as many as 250 different checks before authorizing a loan. Borrowers have the money directly deposited in their bank accounts and make payments through automated withdrawals. Paying by check costs $5 to cover the costs of manually processing payments, Lunsford said.
Origination fees range from 1 percent of the amount borrowed to 5 percent, based on risk, Lunsford said. On a $2,000 loan, that fee would range from $20 to $100.
Interest rates on the loans vary from 5 percent up to the teens — much like credit cards, which also are unsecured loans.
Terms range from 36 months to 60 months , and the minimum amount to borrow is $2,000. This helps differentiate personal loans from payday loans, Lunsford said, adding that the company is targeting customers with prime credit.
The loans are for fixed terms and don’t carry pre-payment penalties.
While RocketLoans is new, personal loans aren’t. Several Detroit-area credit unions also offer the products, at rates as low as 4.99 percent. The loans can be used for any purpose, such as consolidating credit card loans at a lower interest rate.
Lunsford didn’t give any estimates for loan volume, but said the company would set internal targets after the first quarter and expects to add up to 35 people in the customer service area as the business grows.
“I suspect the size of the company will double this calendar year,” Lunsford said. “From a capacity perspective, we have no limits. We’ll dial it up as quickly as we feel comfortable with, but we’re in no hurry to drive volume.”
In addition to expanding Rock Holdings into a new corner of financial services, Lunsford said, “Our real plan is truly to reinforce the strength of Detroit as a technology hub and the importance of what we value in a customer relationship.”