American online lending platform Upstart has introduced a new service that will enable its users to avail a personal loan from its banking partners and pay off credit card bills.
Known as Direct Credit Card Payoff, the new offering is aimed at reducing the risk of personal lending for banks, according to Upstart, and help consumers to break the cycle of credit card debt.
Commenting on the launch of the new service, Upstart co-founder and CEO Dave Girouard said: “Borrowers who pay off their credit card debt immediately are less likely to default.
“When you can reduce the risk of lending for banks while simultaneously helping consumers make the right financial decision, it’s a win-win.”
Using Upstart’s direct payoff of credit cards facility, the banks can reduce default rates on personal loans, while the borrowers are incentivised to pay off their credit card bills at minimum interest rates.
Upstart said that its bank partner Cross River Bank is already witnessing positive results from this new feature. It is said over half of borrowers who were offered this option availed it to pay off their credit card bills.
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Upstart said it will extend this facility to all of its banking partners from next year.
Upstart offers its AI-powered platform to banks which enables them to increase loan approval rates while reducing loss rates.