High Defaults Hammer Online Loan Investors

By Charles Bovaird

Unfortunately, online lenders may have a hard time bringing down the default rates that are causing these performance problems, market analyst Daniel Lugasi told Investopedia during an interview. “The only way for online lending platforms to lower default rates is to make credit standards more stringent for applicants,” said Lugasi, portfolio manager for registered investment advisor VL Capital Management LLC.

However, he emphasized that the only advantage these platforms have over traditional lending sources is their ability to quickly and easily make loans. As a result, “making the loan application process more cumbersome will effectively reduce their competitive advantage.”

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