In a Nutshell: People struggling with debt often don’t know where to turn. And many of the solutions available to them only address part of a consumer’s problems. Simply put, current solutions don’t set consumers up for financial success in the future. Enter LendStreet, which provides a comprehensive and modern take on debt relief that helps set clients on a healthy financial path. The company works with creditors to reduce the amount a client owes and helps clients determine monthly payments they can afford. As a result, many clients not only get out of debt but are able to rebuild their credit and come out with a higher score in the process. This method also benefits creditors because they are able to collect on accounts that may otherwise have been written off.
Anyone who has struggled with debt knows the helpless feeling that comes from watching bills come in and not be able to keep up with them.
The debt piles up quicker than you can pay it, and eventually you are overwhelmed. You start missing payments, accounts become delinquent, and credit scores plummet.
Many hard-working people have found themselves in a situation like this, often because an unexpected expense — like a medical bill or vehicle repair — threw their budget for a loop. In fact, 40% of Americans would not be able to come up with $400 for an unanticipated expense.
Financial literacy in the U.S. is also lagging, which means the average consumer likely doesn’t have the knowledge or tools needed to get out of a downward financial spiral. Eventually, folks may turn to credit counseling, debt settlements, or even bankruptcy.
While these options may offer a solution of sorts, they all come with distinct disadvantages for the consumer’s long-term financial health.
LendStreet understands this and is offering a modern, comprehensive approach to helping consumers climb out of debt and possibly even improve their financial health along the way.
Jerry Nemorin, Founder and CEO of LendStreet, had spent years working with big businesses and creditors on Wall Street before turning his attention to the consumer market.
“I started researching consumers’ options when they become delinquent,” Nemorin said. “How do they get to a point where they can transition from financial distress to financial security? What are the tools and solutions available? I came to the conclusion that there really wasn’t a comprehensive solution on the market.”
Nemorin, following in the footsteps of so many past innovators, decided to create his own solution when he didn’t find one available that suited him.
A Comprehensive Approach to Helping Consumers Pay Off Delinquent Debts and Take Control
Nemorin explained that many common debt relief strategies available to consumers are often lacking in one way or another.
“There was a set of disparate solutions that address one aspect of the consumer’s problem,” Nemorin said. “You had credit counseling, where they were helping the consumer reduce interest rates but not get to the principal, which really doesn’t help because it doesn’t change the monthly payments significantly.”
Another option — declaring bankruptcy — delivers debt relief to consumers but they have to give up access to capital for a long time, he said.
“And there’s debt settlement, which is where consumers are enrolling in these programs and making monthly payments,” Nemorin said. “But those payments aren’t reported to the credit bureaus so the client is not able to rebuild their credit quick enough.”
LendStreet gives consumers in dire financial circumstances a fresh start on old debt by delivering debt relief and providing a path to a better financial future.
“We realized there was a massive opportunity to create a solution that was comprehensive (and) that acknowledges the fact that this was an impaired credit,” Nemorin said. “And those creditors would be willing to take less than what was owed to them which allows us to provide a loan to the consumer based on what they can afford.”
And at the same time, the service would help clients rebuild their credit, he said.
“We work with partners to negotiate with your creditor and refinance your old debt at a discount. That means a fresh start with a lower amount and a lower interest rate for you,” according to the LendStreet website. “We customize your payments to fit your lifestyle, not the other way around.”
In short, LendStreet helps clients reduce how much money they owe and establish realistic payment amounts. It also helps clients rebuild their credit history and ultimately regain control of their financial life.
How the Borrowing Process Works
LendStreet has been providing loans to consumers in debt settlement programs since 2013.
Nemorin said the company has helped thousands of clients turn their debt situation and credit around so they could thrive and no longer worry about simply keeping their heads above water.
“We had a client whose wife was diagnosed with cancer. She was a nurse so she couldn’t work because her immune system had been compromised,” he said. “Because of her treatments and only having one income, the couple had a significant amount of debt.”
Nemorin said LendStreet was able to help the client restructure his debt, and within 10 months his credit score had increased by 180 points. The couple was able to refinance their house at a low interest rate and use the extra funds to pay off the LendStreet loan quicker.
Of course, each situation is unique so results will vary, depending on how much debt a client has, his or her income level, and other factors.
LendStreet is usually able to let people know whether they have been approved of a loan within one business day after applying. Clients must have a credit score of at least 400. LendStreet will refer people who may not meet their criteria to a trusted third-party credit counseling company.
“If you are approved, you will sign your loan documents now, but LendStreet will fund your loan in multiple steps later,” according to the company website. “For the first six months you will be working with a debt settlement company and building savings in a dedicated account. This is your money and your bank account.”
After six months, current debts are likely to be charged off by creditors, and the debt settlement company will be able to begin negotiations with your creditors on your behalf, according to LendStreet.
“Your debt settlement company will get your approval for each settlement and then LendStreet will deposit the funds into your dedicated account so it is available for payment right away,” according to the website. “This process will continue until all of your accounts have been settled.”
Although many consumers who enter this process will initially see their credit scores take a dip, within seven to 12 months, clients often see their scores improve to levels higher than they were before.
LendStreet Helps Creditors Reduce Losses and Investors Earn Higher Returns
With its comprehensive strategy for helping clients pay their debts, LendStreet actually helps creditors reduce losses they may normally incur. Without the assistance of LendStreet, many of its clients would never find a path to paying any part of their debt and creditors would never see any of the money.
“We are passionate about helping people, so using our financial expertise, we have created a new, complete, transparent, and social solution,” according to the company. “Social lending has emerged as a viable alternative to traditional banking. It is used to help alleviate poverty in emerging countries, to fund small businesses, and even to help people with good credit reduce their interest rates.”
When LendStreet launched, the company endeavored to use the social lending model to help individuals struggling with debt.
“Using our collective experience with this social problem, together with our financial expertise and the power of social lending, we have created a financial community that provides a new, smart solution,” according to the company.
The majority of LendStreet’s funding comes from the institutional side of the finance world these days. In 2018, the company announced a new round of funding from institutional investors.
“LendStreet, Inc., the leading online consumer debt restructuring and consolidation platform, announced that it has closed a $7 million Series A equity round, led by Prudential Financial, Inc. and Radicle Impact,” according to a press release. “The company has also raised $110 million in debt financing from Prudential and Community Investment Management.
These companies joined a number of other institutional investors and clients who contributed to the funding round.
With its comprehensive approach to helping clients get out of debt and gain control of their financial future, LendStreet is proving to be an impressive model in the finance world.
“Together we can rebuild stronger,” according to the company. “Together we can make a difference.”