The Free Toaster

E026 - Positive & Negative Select (Think Like A Recruiter)

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I explain positive and adverse selection in lending using recruiting as an analogy. If you've ever hired someone, you'll instantly understand why your channels, pricing, and process determine your loan portfolio quality.

Key Takeaways

The Big Idea: Attracting great borrowers works exactly like hiring great people.

The parallels...

1. Channel Quality
  • Inbound (website traffic): People actively searching, often desperate
  • Outbound (direct mail): Higher-quality prospects who aren't hunting
  • Best candidates and borrowers usually aren't usually looking
    • 2. Price Matters
    • Post a $100K vs $200K director role—which gets better candidates?
    • Same with loans: competitive rates attract quality borrowers
    • Even small rate differences (12% vs 14%) shift your entire applicant mix
      • 3. Process Friction
      • Complex hiring processes drive away top talent with options
      • Heavy loan applications do the same to good credit risks
      • You're left with applicants who have time and fewer alternatives
        • Action Items for Fintech Marketers
        • Audit your inbound vs outbound channel mix
        • Price competitively—good borrowers shop around
        • Streamline your application process ruthlessly
        • Go find great borrowers instead of waiting for them

          • You can find a written version of today's content in our Newsletter:

          https://www.thefreetoaster.com/p/positive-negative-select-in-lending

          ***


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          A word from our sponsor, New Market Growth:

           

          New Market Growth helps fintech consumer lenders generate explosive growth on affiliate marketing channels like Credit Karma, Experian Marketplace, LendingTree, and others.


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