Virgin Money has put four lending innovations into action with the Virgin Money Lender Blender for student lending:
- Product design – The borrower indicates who they are (parent, student, friend/family member) where the university is located (for example, state level in the US), which university the student will attend (a drop down list is provided after selecting the location of the university), the student’s year in school (for example, undergraduate year 1, graduate year 4, etc.) and the borrowing amount needed (with an estimate provided automatically that can be overrided). The borrower can then create a “blend” of loan products (friend/family, credit card, private student loan, home equity loan, etc.) to reach the borrowing amount needed.
- Pricing visibility – For each type of loan product the borrower puts into the blender, an average estimated interest rate is provided. For example, the following average interest rate estimates were provided to me last week when I looked at this:
- Friends/family loan: 4.00%
- Home equity loan: 5.70%
- Federal PLUS loan: 8.50%
- Private student loan: 11.00%
- Credit card: 12.00%
- Profitability visibility – The blender then provides an estimate of how much the borrower would save by using the blend of loans they have selected compared to using a private student loan (11.0% interest rate) for the entire funding. For example, a borrower can save an estimated $27,000 by using a combination of a friends/family loan (50% of the loan total) with a home equity loan (the other 50% of the loan total) rather than a private student loan.
- Process visibility – Once repayment is underway, the borrower can set up relevant alerts. Loan servicing from Virgin Money (at $9 per payment) includes e-mail reminders, friendly phone calls if payments are missed, monthly statements and year-end reports.