By AnnaMaria Andriotis
When Wells Fargo told the fintech Bilt that it would no longer be the lender for its rent-rewards credit card, Bilt scrambled to find another large bank partner. When that failed, Bilt wound up with private-credit funding.
In February, Bilt struck a deal to move roughly $1.2 billion of credit-card balances with funding arranged by a group including Blue Owl Capital and Stone Point Capital as well as Goldman Sachs and TD, according to people familiar with the deal.
The companies also agreed to fund hundreds of millions of dollars of credit-card balances that Bilt cardholders will incur in the future, the people said.
Consumer debt has become one of the hottest categories in private credit, increasingly sought after by funds and investment arms of insurance companies on the hunt for high-yielding investments.
Private credit is in focus on Wall Street right now because of the loans that fund managers have made to software and other companies, often as part of private-equity buyouts, that are now running into trouble. Investors are pulling money away.
In consumer debt, the private-credit engine is powering a variety of companies including financial-technology firms to turn out more and more loans.
Imagine a Harley-Davidson customer at the dealer who takes out a loan to purchase a new motorcycle. The loan is provided by Harley-Davidson Financial Services, which has a deal to sell about two-thirds of its new loans to KKR and the bond giant Pimco. Funds run by those firms get a debt security backed by the hog, and Harley gets to make another loan to the next customer quickly. The customer sees no apparent difference, as Harley continues servicing the loan.
The same thing is happening when consumers purchase a mattress with financing from buy-now-pay-later firm Affirm, sign up for a student loan from Sallie Mae or borrow for their ATV from Octane Lending.
Private-credit funds held $350 billion of consumer-loan balances last year, compared with less than $200 billion in 2019, according to estimates from Jefferies. Those sums are a mixture of previously originated loans that lenders unload to private credit and increasingly so-called forward-flow arrangements, which involve agreements to buy future loans that haven't been originated, similar to the Bilt and Harley pacts.
Much of this debt is personal loans that are often unsecured and that consumers can use for almost anything they want to buy.
Last year, about a quarter of newly originated personal loans were funded by private-credit forward-flow arrangements, up from about 6% the year before, according to Jefferies. The funding mechanism is also picking up for auto and private student loans.
"Private credit is looking to broaden its addressable market, which has historically been skewed towards the commercial side," said Mike Taiano, vice president in the financial institutions group at Moody's Ratings. "It's a diversification play to some degree."
Making this funding possible has been the steady stream of capital coming from investors into private-credit funds and insurers that need to be invested quickly.
Fintechs and other nonbanks are attracted to these deals because they lack large balance sheets and need to grow by originating more loans. They can remain "capital light" and less levered since they are unloading large chunks of debt, often at a premium.
Among the deals: TPG this year agreed that it would buy around $2.4 billion of mostly personal loans from OneMain Financial, which lends to people who typically don't have high credit scores. Late last year, KKR entered into a partnership with private student loan lender Sallie Mae that involves buying at least $2 billion of new loans each year for three years.
Blue Owl now has a dedicated asset-backed finance strategy after buying alternative asset manager Atalaya in late 2024. It entered into nearly $18 billion of forward-flow agreements last year across several lenders including PayPal, SoFi and LendingClub, according to data tracked by Jefferies.
Insurance companies, many of which are now owned by or affiliated with private investment funds, are also expanding. Affirm last year signed forward-flow agreements for roughly up to $9.75 billion from Liberty Mutual Investments, the investment firm of Liberty Mutual; PGIM, the asset-management business of Prudential Financial; and New York Life. The funding is being used for Affirm's monthly installment loans.
Some private-credit executives say consumer debt can be less risky, pointing to the current relatively low delinquency rates on credit cards and other consumer loans. They also find comfort knowing the credit-score and other underwriting requirements around the loans that they buy from consumer lenders.
Others are bearish on consumers, especially those who don't have mortgages. They point to inflation, wage stagnation and a slowing job market, all of which can reduce consumers' ability to pay off debts.
The chase for consumer loans has also contributed to the recent headline concerns. A mortgage lender in the U.K., Market Financial Solutions, grew rapidly in recent years pledging its loans to private-credit firms. But it imploded this year, and firms have accused it of using loans as collateral several times.
Stone Ridge Asset Management, which has an interval fund with consumer and small-business loans from fintech lenders, has faced particularly high redemption requests.
A fintech addiction
Nonbank lenders have traditionally relied on warehouse financing, which functions like a line of credit, to make loans to consumers. Forward flow is an extra mechanism to fund loans. In an ideal scenario, the mix of funding sources gives the lender the ability to originate more or larger loans to consumers.
Octane Lending, which finances motorcycles, ATVs, RVs and other outdoor recreational equipment, entered into up to $700 million of agreements with New York Life, Equitable and a unit of MetLife. Octane expects north of $2 billion in new agreements from insurers to come together by the end of the second quarter.
The goal, said Chief Executive Officer Jason Guss, is to continue growing at a reasonable pace without getting overlevered itself. He also wants his firm to have capital on the sidelines in case of an economic slowdown.
"Quite a few fintechs are addicted to forward flow," said Jordan Miller, CEO of fintech Yendo, which issues credit cards backed by collateral including people's cars and homes and receives much of its funding from private credit.
It isn't all upside, fintech and private-credit executives say. Providers of forward-flow arrangements can pull those deals easily -- citing reasons ranging from increased delinquencies to macroeconomic conditions.
In the Bilt deal, the credit-card debt was moved to Fidem Financial, which acts as a balance sheet and gets funding for the program from Goldman, TD, Blue Owl and Stone Point. (Stone Point is also an owner of Fidem.)
Shortly before the Bilt deal was scheduled to be finalized in early February, Blue Owl raised concerns: It wouldn't continue with the deal, it told parties involved in it, unless several things occurred.
Blue Owl wanted a guarantee that would involve its receiving the first tens of millions of dollars of profit generated by the credit-card program and wanted to dig more into the feasibility of Bilt's forward-looking projections, according to people familiar with the matter.
Blue Owl blessed the deal on the eve before the card program was scheduled to transfer its balances away from Wells Fargo.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
(END) Dow Jones Newswires
April 19, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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