Slider Payments Could Prove Slippery

 
Goldman Sachs Group unleashed its online consumer-lending platform yesterday. Known by the moniker Marcus, it's designed--get this terminology, to allow regular Americans for the first time, according to the Wall Street Journal, "to borrow from the Wall Street powerhouse."

Knowing what you now know about Wall Street powerhouses, why would any "regular" folks want to float a loan from them? One quick reason is some of usual, favorite sources in this downturn have dried up. Another is they smell the money online alternatives lenders are raking in for a variety of reasons not the least has been the contempt Wall Street powerhouses have for years hdd for "regular Americans." Still another is these high flying Titans of finance need you to help bail them out.
The money Goldman gets to fund the loans comes from customer deposits.

According to the WSJ, Goldman, which has been studying online lending since at least 2014, enters the market without the same handicap. The bank will fund the loans from its own $130 billion deposit base, and has no plans to sell them on to others.

Goldman Sachs manages more than $1 trillion in assets from the world’s top investors and now offers banking for the 99%. WSJ’s Justin Baer joins Lunch Break and discusses the launch of GS Bank, where Goldman offers savings accounts for as little as $1. Photo: AP (Originally published April 26, 2016) 

That funding advantage allows Goldman to take a different tack than existing online lenders in some areas.First, Goldman won’t charge borrowers any late fees for missed payments or early repayment fees. It also doesn’t charge any upfront fees, either. Existing online lenders act basically as toll-takers, selling their loans on for a few percentage points. To boost their revenue, they take a small percentage of the loan as a fee. Holding the loans to maturity, Goldman can capture all the interest income. It isn’t clear whether that means the loans will be cheaper, though. Goldman’s lowest rate of 5.99% is equivalent to LendingClub’s lowest rate including the fee, at least for some loans.

Second, Goldman is offering more customizable terms. Borrowers from Marcus will be able to choose from a slider of monthly payments, which varies the amount of the loan, payback term, and rate. The bank says this is a big advantage of using its own money to lend. 

If there's one thing people know about banks in general and Wall Street investment banks in particular it's that fees can be invoked at any time and they usually are. Beware of that term slider payments.You can almost be assured the slide won't end up in your favor.

They could prove slippery.