Citi’s new personal loan is a challenge to peer-to-peer rivals
Citi is offering borrowers a personalised interest rate and a reusable credit facility.
Global financial services group Citi has launched an innovative new product offering for Australian borrowers. The Personal Loan Plus, which offers a personalised interest rate based on a borrower's financial history and current circumstances, could be described as a rival to peer-to-peer (P2P) loans which have found favour with many Australians.
P2P lenders have long differentiated themselves with risk-based pricing, which provides interest rates to borrowers that are based on their determined risk. It is standard practice in countries such as the US but not in Australia. However, this move by Citi and recent changes to the way Australian's credit scores are calculated may indicate that this could change.
“The launch of the Citi Personal Loan Plus will dramatically enhance the experience for our customers," said Richard Wilde, head of cards and loans at Citi Australia. "In a first for the Asia-Pacific region, customers can use our online platform to obtain a real-time rate estimate without impacting their credit score, in under two minutes."
Citi's Personal Loan Plus offers interest rates of between 8.99% p.a. and 17.99% p.a., with borrowers able to receive a rate estimate without it affecting their credit scores. This is the case with P2P lenders as well. However, unlike a P2P loan, Citi's product is a reusable credit facility which you can draw on without needing to reapply. When your account has a balance, you will need to pay a $10 monthly fee. An establishment fee of $199 also applies.
Citi is not new to innovation for its personal loan products, with its Ready Credit product as an innovative line of credit with a convenient debit card. Wilde notes, though, that Citi is one of the first major banks to offer a personalised interest rate personal loan.