Borrowing experience varies across lenders

Through my professional and personal endeavors, I have accounts with 10 community banks, two of the nation’s largest banks, and one sizable fintech. Each account comes with advantages and disadvantages. Comparing the various customer experiences helps me to understand some of the challenges banks need to meet every day. I recently had the opportunity to borrow money from the large banks and the fintech. 

The first of the loans came from SoFi Bank, the Utah-based fintech that started out as a source of student loans. Now, the company makes all kinds of loans: The solicitation I received in the mail from them promoted an unsecured personal loan. These solicitations come in the mail frequently and usually I throw them away, but this time I considered the offer. Having borrowed and promptly repaid a $30,000 loan from SoFi about five years ago, they said I was pre-qualified. 

Borrowing credit union lingo, they called me a “member” and said they could provide an answer in less than a couple of days. Also, because I had borrowed money from them before, they already had on file a lot of the paperwork they would otherwise need from me. The rate they offered me was high, although not bad for an unsecured loan (at essentially half the rate a credit card would charge). They offered to take 25 basis points off the rate if I agreed to make payments automatically. It was a fixed-rate loan, which was appealing to me in this rising-rate environment. The term was seven years, but I could prepay at any time with no penalty. I only expected to use the money for about six months, so the prepayment feature was important to me; and the higher rate wasn’t so detrimental given I wouldn’t have the loan for very long. 

I went online to initiate the loan application and was able to complete it with ease. All I needed to do was DocuSign my name and the loan would be approved. But I held off for three weeks. I needed to think a bit more as to whether I really wanted to borrow the money. I ended up signing the day before an FOMC meeting where the Fed raised rates by three-quarters of a point. I figured SoFi would make me start over, or refuse to hold my interest rate, if I waited any longer. 

Almost every other day during that three-week period, SoFi sent me a text encouraging me to sign the documents to complete the loan application. “Your SoFi loan is now ready for your signature. Please log in to electronically sign,” or “Remember to sign for your loan. Your SoFi rate is only available for a limited time,” were typical messages. A couple of times I responded to the text messages, but the reply I got said they would have to verify my ID before they could enter into a dialogue with me about the loan. This was a real turn-off, so I never had a text exchange with them.

Ultimately, I signed and the money was placed in my bank account in three days. A few days later, I called SoFi to verify the first repayment due date and a very friendly customer service person helped me. The impressive phone service affirmed my preference for voice conversation over any sort of text-based communication. 

The second sum of money I borrowed came via a home equity line of credit. I refinanced about two and a half years ago, so I didn’t initially think of home equity when I first started contemplating borrowing options. But then someone told me what my home was worth according to Zillow; it was some 50 percent more than the value of the home’s appraisal when I refinanced. I contacted the bank to see what they might be willing to lend, and sure enough, they said I could establish a line of credit based on the current valuation of my home, which they said was close to the Zillow figure. As a HELOC, the rate I would pay was less than half of what I agreed to pay for the unsecured loan through SoFi. 

The HELOC application process took a few weeks, much longer than the SoFi loan application process. The bank did an excellent job utilizing both online application tools and live telephone support. They had a good portal for uploading documents and provided easy-to-understand checklists so I could keep track of what I had provided and what remained outstanding. And, they assigned me to a banker, who responded when I picked up the phone to ask questions. Their phone service was excellent, with the banker thoroughly versed in the particulars of my unique application. On most occasions, I called and left a message and my call was returned the same day. 

The HELOC application process required an appraisal, but it was done by someone who simply drove by the front of the house; there was no interior inspection of our home. The bank sent a closer to our house. My wife and I put our signatures on several documents as the three of us sat around our dining room table at 7 p.m. The closer served as a notary so all of the paperwork was concluded within about15 minutes.

There was one funny little incident in the whole process: A personal banker contacted me about opening a checking account in order to qualify for the HELOC. I explained I already had a checking account with them and really didn’t need another one. The banker was calling from Oregon, which I thought was ironic given there have to be a dozen offices of that bank within a five-mile radius of my house. Also, they surely knew I already had a checking account, so I don’t know why I was targeted for this kind of a sales pitch.

My last exercise in borrowing was with a bank where I have maintained a business line of credit for many years, though I haven’t used it in a long time. I probably would not have chosen to use it this time, except I received a promotion in the mail saying I could take an advance on my line for the next year and pay a special rate of only 3.99 percent. All I had to do was use the “super check” that came with the solicitation. So I did, depositing the money in my checking account. 

It was all very simple since I already had a line of credit in place. But things got wonky a few weeks later. I received a notice in the mail stating a minimum payment was due, except I couldn’t figure out how they came up with the minimum payment amount. The terms of the line of credit allowed me to make interest-only payments, but the minimum payment amount due was much more than an appropriate interest-only payment. Normally, I would figure 4 percent of the borrowed amount and divide by 12 to get my monthly minimum payment, but that didn’t seem to work. Was there now a principal payment required? Was there a fee I was missing? I picked up the phone and called customer service.

I spent more than an hour (on a Saturday) talking to three different customer service representatives, none of whom could explain how the minimum repayment amount was figured. They all wanted to help; I could hear it in their voices, but they simply had no idea. They read through the same disclosure documents that I already had examined, and they couldn’t find an answer either. How maddening!

So I made the minimum payment, but I don’t know if it was all interest or if some was principal. I am not sure what the minimum payment will be next month. I expect to repay the entire loan amount in the next few months, but I find it rather shocking that I was unable to reach someone at the bank who could explain to me how the payment amounts are determined. I can’t imagine that any of the community banks where I do business would demand a payment they could not explain. 

Although each of the three lenders offered a good digital experience, I ended up relying on the telephone in all three cases. It is clear to me that a bank needs to be able to offer an experience where the customer can toggle between the computer and the phone seamlessly. 

At the bank where I had the business line of credit, I had to repeat my account number and other identifying information each time I was transferred to a new service representative. I consider this to be a big negative. I really liked the service I got from the bank that gave me the HELOC because they assigned me a banker, who I could specifically call for help. With the other two lenders, my phone calls were answered by a call center tech who only gave me a first name; they clearly didn’t expect me to have to call them back for anything.

Two other thoughts: In all three cases, I used these lenders because I had used them previously. Familiarity goes a long way, and the ability to use information already on file to streamline the application process is very appealing. And, in two of the three cases, I acted based on a mail solicitation. Customized direct mail still works! Obviously a compelling offer is still essential, but the offer is pointless if the bank doesn’t let me know about it.