Lending platform Earnest wants to help Millennials manage their finances. To build out its offering of loans and other financial management tools the company has raised $75 million in funding, plus $200 million worth of loan capital from New York Life.
Battery Ventures led the round which saw participation from Adams Street Partners and Maveron. The funds will be used to fuel 200 new hires including new marketing and sales professionals as well as engineers and designers.
When Earnest launched last year the company came out with two products: loans for coding academy tuition and consumer loans. But its defining feature was a big data fueled lending engine, built from the ground up. Earnest delivers loan rate estimates in under two minutes using a variety of data including bank account and credit card information, education, job, social media data, and around 100,000 other data points. It essentially relies on anything but credit scores to determine loan eligibility.
Earnest promises low annual percentage rates, an offer it can afford thanks to the reliability of its borrower assessments as well as the minimal costs associated with running an Internet business as opposed to a storefront bank. At last check, the company was advertising variable loan rates as low as 1.9 percent and fixed rates starting at 3.5 percent.
The company has plans to bring these rates to even more financial products. In January, Earnest rolled-out a student loan refinancing to help reduce the burden of these often costly long term loans. Now, the company has plans to launch a mobile app before the end of 2015.
While technology remains a large component of Earnest’s overall platform, CEO and founder Louis Beryl says cultivating relationships with consumers has been key to its strategy. He says he wants Earnest to be a bank that consumers turn to throughout their life time.
That attitude is a stark contrast with peer-to-peer lending platforms, which also use large swathes of personal data to connect consumers with lenders. The big difference is that peer-to-peer lenders offer a transactional service. There’s no opportunity to develop a relationship with a given lender on Lending Club, for example.
Earnest’s relationship based approach to lending seems to be working. In the last year and a half, the company has gone from processing $8 million in loans at the end of 2014 to lending roughly $2 million to $5 million daily. And Beryl plans on launching more financial products in the coming year, though he declined to be specific about what those products would be in an interview. Rather he talked broadly about his vision for Earnest.
“I would say its the purpose of a bank is to help people realize their hopes and dreams, so they can be able to to go to school, buy a home, maybe purchase a car, and borrow money in a time of need,” says Beryl. “We want to expand to really be able to serve professionals over their whole lives.”