The majority of $SOFI's loan portfolio is composed of personal loans. However, stating personal loans are bad is not a legitimate argument. That's even true in a recession.
Personal loans are not risky just because they are unsecured. Mortgages, similarly, are not safe just because they are collateralized. The Great Financial Crisis in 2007-2009 was not caused by rampant defaults on personal loans, but on ostensibly “safe” mortgages that were backed by the collateral in physical real estate. In fact, personal loans actually did fairly well in the GFC.
Risk is not defined by the type of loan, it is determined by the the odds that the bank loses money on that loan. Is the next banking crisis more likely to happen because of personal loans or because of non-performing commercial real estate loans? Those are backed by collateral as well, making them "less risky".
People need to start thinking from first principles. SoFi's loan book is full of high-yielding, short-duration, super prime loans given to people with excess cash flow. We are talking about loans yielding 13.7%, with FICOs above 740, with a weighted average life of loans less than 18 months, and average salary of the borrower above $160,000. Would you rather have that or a balance sheet full of low-yielding, long-duration MBS, and low-yielding CRE on underwater assets?
Think from first principles and think for yourself.
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