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

The Free Toaster