U.S. consumers are plagued with a record $8.8 trillion in mortgage debt, and the mortgage industry’s traditional push towards low-interest rate loans with sky-high down payments does not always take into account the consumer’s unique financial situation. LoanSnap has devised a solution, in the form of “smart loan” technology.
The technology analyzes thousands of loan options to find the best fit for a consumer’s current and future financial goals. The company has recently received investments from Richard Branson, Joe Montana and others. To find out more, Digital Journal spoke with the founder Karl Jacob.
Digital Journal: What is the current state of the U.S. housing market?
Jacob: The housing market is starting to slow. The cost of housing is up in a lot of markets and mortgage rates are starting to rise. The Federal Reserve has raised interest rates three times this year and the 30-year fixed rate is now almost 5 percent, the highest it’s been in seven years, but still well below the 40-year high of nearly 19%. New home construction is down, and the pace of home sales has fallen to its lowest level in a few years. Consumers need all the help they can get right now to find a home that meets their needs and takes into consideration their entire financial picture.
DJ: Why are mortgages so complex for the typical person to assess?
Jacob: Mortgages are complex for the fact that most people don’t take into account how they impact the rest of your financial health. The problem is that a mortgage is only one piece of your overall financial puzzle, and most conventional lenders don’t look at the full picture, aside from your ability to pay back your loan.
Most people get sold a mortgage based on a low interest rate because it looks good on paper—a lower rate saves you money, right? Not always. It’s important to keep in mind that banks aren’t concerned with saving you money—their primary concern is whether you’ll make your payments. Meanwhile, credit card debt is at an astonishing high of $927 billion, and among households carrying a balance, it tops $15,000. This costs Americans an astronomical amount, with the average credit card interest rate at almost 17 percent.
Consumers need a way to consolidate that credit card debt with their mortgage to reduce the amount of interest they’re paying across the board. By paying off credit card debt as part of a mortgage package, it could save families hundreds or thousands of dollars a year. In fact, our data scientists recently found that Americans lost $58 billion in 2017 because they didn’t move their credit card debt to their home loan. But, conventional mortgage companies don’t tell you that, and they often don’t even offer it as an option.
DJ: Can technology assist with simplifying mortgages?
Jacob: Absolutely! Technology can speed up the application, approval and execution process, all while taking your entire financial situation into account. Automated solutions like LoanSnap can analyze a customers’ financial information in seconds so people can see *all* of their financial options, not just a few. This is much faster than a manual, human-powered process and ensures you always have the most up-to-date financial options at your fingertips. Plus, automated mortgage technology allows you to apply for a loan anytime, without having to go into a bank.
There’s a reason for the phrase “banker’s hours”—banks are only open when most people are at work, making it tough to get there during business hours. Finally, technology can save consumers a tremendous amount of time by pulling their financial data from existing sources rather than forcing them to manually input data that already exists.
DJ: Why did you set up LoanSnap?
Jacob: We were tired of seeing people waste money and time on high interest rates and dumb loans, so we developed a smart loan program that analyzes a customer’s entire financial situation in seconds and gives them options that can save them money. Conventional lenders can’t do this because they don’t have the data and technology to offer the convenience and options. LoanSnap gives people the power to take control of their finances with a more convenient and comprehensive approach.
DJ: How does LoanSnap work?
Jacob: LoanSnap does 95 percent of the work in applying for a mortgage. Rather than manually entering all of your data, customers use our website or app (for iOS and Android) to simply scan their drivers’ license or enter their address and the last four digits of their Social Security number. We gather all of their pertinent financial information from trustworthy, verifiable sources, and with the user’s permission. Based on this information and the applicant’s answers to a few simple questions, we use artificial intelligence to analyze the applicant’s entire financial picture and provide personalized options in seconds.
DJ: How do you test the product?
Jacob: We do extensive testing on the product on all platforms, including online or through our mobile app. In addition, we do rigorous security audits of both the software and our processes to ensure customer information is kept completely secure. We spent years studying the loan process at large mortgage companies, interviewing employees and customers to find the issues and fix them. For example, we found customers and employees were making tons of mistakes while entering reams of information like address, past work dates, salaries etc. So, we built a system that could automatically get this data with the customers permission from verified sources eliminating data entry errors.
DJ: Have you attracted many investors?
Jacob: LoanSnap has already raised over $12 million in funding from True Ventures, Baseline Ventures, Richard Branson’s Virgin Group, Core Innovation Partners, Joe Montana’s Liquid 2 Ventures, OVO Fund, Transmedia Ventures and angel investors.
DJ: How are you marketing LoanSnap?
Jacob: We’re getting the word out through a strategic PR and social media campaign and a new program focused on support for veterans. In addition, one of our most impactful tactics is word of mouth marketing. We have a large community of satisfied customers who have used LoanSnap to purchase a home and take control of their financial situation, and it’s this community who spreads the word to their friends and family. We’re very fortunate to have our network grow immensely since our launch in July of this year (2018).
