In a wine cellar three years ago, four finance industry veterans launched a company to lend money through a web-based platform to people who don’t have perfect credit.
In the post-Great Recession world, Kennesaw, Ga.-based LendingPoint saw an opportunity in what is called the “near prime” market, borrowers whose credit rating is in the 600-700 range. LendingPoint loaned $15 million its first year, according to Tom Burnside, one of the founders and chief executive officer.
LendingPoint has since reached $260 million in loans, employs more than 100 and the company no longer occupies Burnside’s wine cellar.
Now, LendingPoint has added a twist to its core business – making loans easier to obtain for covering out-of-pocket medical expenses.
“We do a lot of medical as is,” Burnside said of the company’s standard lending.
But a new deal with ezVerify, a healthcare information technology company based in Miramar Beach, Fla., gives patients more accurate information on what insurance will pay and what they have to pay themselves. With ezCarePoint, the new service partnership between LendingPoint and ezVerify, the loan decision can be processed quickly, before the procedure is performed so a patient doesn’t get hit later with unexpected expenses.
The market size for this type of lending could be in the tens of millions. According to a 2014 survey from The Commonwealth Fund, a New York-based private foundation that promotes improving the healthcare system, 31 million adults aged 19-64 who have insurance had such high out-of-pocket expenses or deductibles relative to their incomes that they were underinsured.
At the time, 44 percent of those underinsured skipped needed care because of the cost. Half of the underinsured had debt loads of about $4,000.
Burnside said that $3,500-$4,500 is the average loan for medical expenses, roughly a third of the average standard loan LendingPoint makes.
Sara Collins, the foundation’s vice president for healthcare coverage and access, said out-of-pocket expenses could increase with changes proposed in Congress to the Affordable Care Act.
“The Senate bill to repeal and replace the ACA would dramatically increase out of pocket cost exposure by reducing the share of costs covered in benchmark plans from 70 percent to 58 percent,” Collins wrote in an email response to questions.
She expressed concern that people should have to borrow money to cover deductibles and out-of-pocket expenses.
“We should be focused on lowering cost barriers to healthcare for people, rather than increasing their costs and medical bills by making them take loans out to cover their costs,” Collins said. “This would not encourage people to get the healthcare that they need, just increase the risk of high medical bills and debt loads.”
Burnside agreed that healthcare costs are challenging in general.
“We can’t resolve all of those other issues,” he said. “We can only resolve the issue in front of someone needing a medical procedure.”
LendingPoint’s program is open to those with prime credit as well as near prime. The introductory interest rate is no more than 10.99 percent, Burnside said, lower than LendingPoint’s regular rates, which can run up to 35 percent. The longest term is 48 months.
“It’s a lot cheaper than putting it on a credit card,” he said.
But the product also has an option of paying off the loan in six months with no interest.
The deal with ezVerify emerged after looking more closely at the source of borrowers seeking the loans. Burnside said they discovered that ezVerify was already integrated at the point of sale with hospitals, making the application and loan process more efficient and quicker.
For the borrowers, the need for a loan to cover medical costs is part of the story they tell in the application process. LendingPoint markets itself as looking beyond the credit score in making the loan determination.
And the borrower they target is one that major banks tend to shun.
“Bank don’t want to serve consumers with fair credit,” said Juan Tavares, LendingPoint’s chief strategy officer and a co-founder. “But these consumers don’t want the other option.”
That other option involves payday loans with high interest rates. Tavares said one goal is helping the borrower graduate to a better credit rating.
Most of the transactions are done through a mobile website, Burnside said. And surprisingly, about half the people approved for loans never take them.
“They just want to see if they can get one,” he said.
LendingPoint currently operates in 13 states, but is planning to increase coverage to 44 states through a partnership with Utah-based FinWise Bank.
LendingPoint will add more employees as it embarks on the broader nationwide lending quest.
“That will probably push us up to $40 million-$50 million a month,” Burnside said.
Editor's note: A previous version of this article misspelled the name of Juan Tavares.