Personal loan originations have returned to pre-recession levels with sustained year-over-year growth around 20% for multiple years. Meanwhile, delinquency rates remain at historic lows and demand has been met by increased liquidity amid a low-rate environment. If you’ve been riding the wave, take note: there are signs indicating growth is leveling off. How can lenders become more efficient in finding personal loan prospects going forward to sustain growth? And if you are a lender looking to enter the personal loan space, what steps should you take to assess the marketplace and seek out the right opportunities? Learn more in this slideshare presentation.

1. How lenders can capitalize on
the growth in personal loans
January 25, 2017

2. About our speakers:
Paul DeSaulniers
Sr. Director, Experian
Kyle Matthies
Sr. Product Manager, Experian
Kelley Motley
Director of Analytics, Experian

3. 3 © Experian
1.Personal loan market overview
2.Comprehensive credit marketing
3.Building the strategy
4.Best practices
5.Q&A
Agenda
How lenders can capitalize on the growth in personal loans

4. • Understand the latest in personal loan trends
• Learn the three pillars of personal loan marketing
• Discover the analytics methodology behind
Experian’s Credit3D
Objective

5. 5 © Experian
Closed-end uncollateralized financial
trade that can be used for:
• consolidation of existing card, auto,
or other debt
• financing “dreams” such as
vacations or weddings
• unexpected expenses such as home
repairs or a medical emergency
What is a personal loan?
How lenders can capitalize on the growth in personal loans

6. 6 © Experian
Market Overview
How lenders can capitalize on the growth in personal loans

7. 7 © Experian
Personal loan originations
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
4Q16:
$30.9BN
-5.64% YoY
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Percent Change YoY 2013-2016
DollarsofLinesOriginated(Billions)
Source: Experian IntelliViewSM

8. 8 © Experian
Model Overview:
• Predicts risk of borrower
• Likelihood of future serious delinquencies
(90 days later or greater)
• Any type of account
• 24-month performance
• Score range of 300–850
• Higher scores represent
a lower likelihood of risk
• Lower scores are
higher risk
VantageScore® 3.0
A = Super-prime 781–850
B = Prime 661–780
C = Near prime 601–660
D = Sub-prime 500–600
F = Deep sub-prime 300–499
How lenders can capitalize on the growth in personal loans

9. 9 © Experian
Distribution of personal loan originations
by VantageScore® band
636
300
400
500
600
700
800
0%
10%
20%
30%
40%
50%
60%
70%
2016 Q4
Super Prime Prime Near Prime Subprime Deep Subprime Average
Source: Experian IntelliViewSM

10. 10 © Experian
Source: Experian IntelliViewSM
Personal loan delinquency rates by state
Best/worst five states
2016 60-89 DPD
1. Alaska 0.16%
2. South Dakota 0.19%
3. Oregon 0.21%
4. Iowa 0.21%
5. New Hampshire 0.21%
…
47. Oklahoma 0.66%
48. South Carolina 0.69%
49. District of Columbia 0.71%
50. Illinois 0.76%
51. Georgia 0.77%

11. 11 © Experian
Personal loan late-stage delinquency rates
Delinquency near pre-recession low
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
60-89 DPD 90-180 DPD
Percent balances
4Q16 Data:
60-89: 0.49%
90-180: 0.74%

12. 12 © Experian
Comprehensive Credit Marketing

13. 13 © Experian
Marketing strategy should be about more than just
response rate. A comprehensive approach can ensure
quality originations and healthy portfolio growth.
1. Response Rate
2. Risk Expansion
3. Long-term Value
Three Pillars of
Comprehensive Prescreen
How lenders can capitalize on the growth in personal loans

14. 14 © Experian
How do you reach receptive audiences to get the most out of your marketing campaigns?
Offer timing Offer relevance
Combine propensity models and offer relevance to get the right consumers the right offer at the right time.
Response Rate: Make an Impact
Most people don’t need your product; are you effectively finding those that do?
How lenders can capitalize on the growth in personal loans

15. 15 © Experian
Current Profile
• Credit Score: 641
• Utilization: 41%
• Revolving and Personal Trades: 4
• Outstanding Balances: $13,000
What’s Joe Doing?
• Making more than the monthly payment to pay down revolving debt
• Seeking personal loan to consolidate remaining balance
• Wants one monthly payment at a lower interest rate than
revolving cards
Where’s Joe Going?
• Prime risk score as a result of decreased utilization
• Building new borrowing relationships
How do you spot the trend?
• Declining trended utilization indicating deleveraging
• Ability to pay indicated by estimated income
Risk Expansion: Not Your Average Joe
Risk expansion without all the risk
` Past Present Future
Score 618 641 703
Utilization 66% 41% 23%
Trades 6 4 4
Balances $21,000 $13,000 $6,000
How lenders can capitalize on the growth in personal loans

16. 16 © Experian
• Many consumers make steady payments throughout
the term, but others use personal loans for
short-term needs.
• Many short-term borrowers close their personal loan
and open a new trade, often in the same month, to
gain access to additional cash.
• Identify consumers upfront to create retention
opportunities and build loyalty.
Long-term Value: Build
lasting relationships
How lenders can capitalize on the growth in personal loans
No “Set it and Forget It” in Personal Loans

17. 17 © Experian
Building the Strategy
How lenders can capitalize on the growth in personal loans

18. 18 © Experian
Data Sample
Sample of accounts that originated a personal loan from June 2015 – December 2015 (11.1M
trades)
Performance Metrics:
Identified: originations, delinquencies, and attrition
Segmented by risk: super prime, prime, and near prime
Regression Testing: Ranking predictive attributes independently identifies a short list of tools that
may become part of selection criteria.
Chi-square Attribute Interaction: As attributes are applied in a decision tree, their interaction
creates unique combinations. An attribute that ranks lower independently may become significant
when combined with other attributes.
Analytics Approach
How lenders can capitalize on the growth in personal loans

19. 19 © Experian
Who opens a personal loan?
No Revolving
Trade w/ Bal.
Revolving Trade
w/ Balance > $0
67% of those that open a
personal installment loan had
a revolving trade with a
balance >$0
Originations June – December 2015
67%
33%

20. 20 © Experian
•31.5% of consumers that close a personal loan reopen another within
a few months of the original account closure
•68% of consumers that re-open a new personal loan within a short
timeframe of closing another person loan, do so with the same
company
28% additional open within one month
How do consumers use personal loans?
Month of personal loan closure
47% of those that reopen do so the
same month the other loan closed
The remaining 25% open within two months of previous account closure
Jan – March 2016
How lenders can capitalize on the growth in personal loans

21. 21 © Experian
Analytical segmentation offers an opportunity to refine you approach
RESPONSE
RISK
RETENTION
Personal
Installment
Performance
June 2016
Observation
June 2015
Dec 2015
Open Personal
Installment
Performance
6 Months
How lenders can capitalize on the growth in personal loans
12 Months

22. 22 © Experian
Upgrade your approach through analytics
Swap in
Swap Out
How lenders can capitalize on the growth in personal loans

23. 23 © Experian
VantageScore provides bad rate of 4.32% for consumers scoring 604-646
Overlaying premier attributes provides additional separation with bad rate of 3.3% - 8.70%
Total number of open personal finance
trades open in the last 6 months
Risk Score
601-603
7.32%
Bad Rate
Risk Score
647-660
2.65%
Bad Rate
Near Prime
4.04%
Bad Rate
1+
8.70%
Bad Rate
<1
3.30%
Bad Rate
Risk Score
604-646
4.32%
Bad Rate
RISK
Risk Segmentation
Near-Prime Population

24. 24 © Experian
Risk Score provides close rate separation of 36% for consumers scoring 601-660
Overlaying premier attributes and trended data provides additional separation with close rate of 30% - 60%
# of trades with revolving
utilization change in last 3 mos.
Risk Score
601-626
40.01%
Close Rate
Risk Score
627-660
34.18%
Close Rate
Near-Prime
36.47%
Close Rate
3+
29.11%
Close Rate
<8
29.72%
Close Rate
RETENTION
Retention Segmentation
Near-Prime Population
<3
46.64%
Close Rate
8+
59.71%
Close Rate
Total number of personal
installment trades

25. 25 © Experian
Best Practices and Credit3D
How lenders can capitalize on the growth in personal loans

26. 26 © Experian
• All lending is subject to cyclical trends, successful lenders focus
on the right product at the right time.
• Beware of marketing fatigue. Bombarding consumers with
mailers can damage your brand image and make it more likely
for your offer to end up in the trash.
• Focus on personal loans in the second quarter of the
calendar year as consumers seek to consolidate revolving debt
and only target consumers that are most likely to respond.
Timing is everything
How lenders can capitalize on the growth in personal loans

27. 27 © Experian
• Maximize response rates: Propensity tools aren’t
enough. Layering credit attributes can further refine
results and improve campaign performance.
• Risk expansion: Expand risk score cutoffs without
taking on incremental risk. Trended data helps identify
trends in credit behavior. Find candidates in lower
score ranges who are deleveraging and trending up.
• Long-term value: Understanding how a consumer
uses credit enables long-term loyalty building. Give
your team the edge by identifying likely short-term and
long-term borrowers.
Think comprehensive
How lenders can capitalize on the growth in personal loans

28. 28 © Experian
Credit3D is a suite of segmentation products for use in batch prescreen, account review, and online marketing
and decisioning.
• Propensity scores and attributes
• Ability to pay metrics
Credit3D comprehensive solutions package the most predictive Credit3D products to optimize marketing efforts:
Segmentation with Experian’s Credit3D
Comprehensive solutions leveraging the latest data and analytics
How lenders can capitalize on the growth in personal loans
• Trended attributes for risk optimization
• Offer alignment and profitability
• Response Rate
• Risk Expansion
• Long-term Value