E029 - Positive & Negative Select (Think Like A Recruiter)

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

***

A word from our sponsor, Fintel Connect

Drive thousands of new accounts and billions in deposits with the only partner marketing solution built for fintech and banking – your all-in-one affiliate platform, partner network, agency, and marketing compliance engine.

https://partner.fintelconnect.com/get-to-know-fintel-connect?utm_campaign=13897733-2025%20Partners&utm_source=The%20Free%20Toaster&utm_medium=podcast

 

A word from our sponsor, Spinwheel:

 

Reduce friction in your lending application with just two fields—phone number and birthdate. Spinwheel’s APIs boost application rates by 20-30% while also providing real-time credit data and seamless payment processing. Want to see it in action? Connect with their Head of Growth for a demo!

https://spinwheel.io/partner/?utm_source=freetoaster&utm_medium=podcast&utm_campaign=june

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. Affiliate marketing involves marketing & credit risk expertise, and NMG's founders bring this with 21+ years of lending experience and 8+ years experience as executive affiliate operators. If you'd like help planning or implementing your affiliate marketing strategy, email us at [e-mail]

 

Subscribe to the Free Toaster Newsletter: www.thefreetoaster.com/

 

Timestamps:

(00:00) Introduction to Positive and Adverse Selection (02:19) Pricing Strategies in Lending (04:01) Funnel Friction and Its Impact (06:35) Personal Stories on Price Signals (09:38) Recap and Final Thoughts