Now Goldman Sachs wants to lend to the little guy

Goldman Sachs (GS) has been called a lot of things in recent years -- “a great vampire squid” and “the evil empire” among them -- but now it’s hoping consumers will think of it in a new way: as a friendly lender to the little guy.

The investment bank on Thursday opened a new online personal loan service called Marcus, which is named after one of the firm’s founders, Marcus Goldman. Providing a new name may help shield it from the negative view that many consumers continue to hold of big banks. Gallup noted last year that about one-quarter of Americans had very little confidence in them.

The move comes as Goldman is also pushing into consumer banking. In April, it opened an online bank that allowed anyone with $1 to open an account, compared with Goldman’s $10 million minimum for a private wealth management account. 

Yet in rolling out Marcus, Goldman is taking a page from Google (GOOG) by selectively hand-picking its first users. If you haven’t received a code in the mail from the bank, you can’t be among those who can initially apply for its loans.

Why is Goldman focusing on the little guy after more than a century of financing deals and mergers? It has not only taken a recent hit to its core investment banking business, but nimbler “fintech” startups are illustrating that catering to average Americans can be a big business.

“We at the firm feel that there is a confluence of a few things which has made us decide to get into this business,” said Harit Talwar, the head of the Marcus project, in a Goldman podcast earlier this year. “One is that digital technology is making large brick-and-mortar branches questionable. You don’t need necessarily brick-and-mortar branch networks to get into consumer financial services or consumer lending.”

Data and analytics are also fueling the push into fintech, which allows companies to make lending decisions based on analysis and a person’s credit profile rather than “judgmental lending,” he added.

However, Goldman is adding in a layer of judgment when it comes to who receives the first codes: Consumers with credit scores above 660, or prime credit, will be its focus, The New York Times noted. 

Marcus will provide unsecured loans of up to $30,000, which are geared toward paying off credit cards or completing home upgrades, such as replacing a roof. The loans will have fixed rates between 5.99 percent to 22.99 percent APR, with lengths of 24 to 72 months. Marcus also advertises “no fees. Ever.”

“Only the most creditworthy applicants qualify for the lowest rates and longest loan terms,” the site notes. “Rates will generally be higher for longer-term loans.”

While it’s possible to transfer credit-card debt to cards with an interest-free period of as long as 21 months, the Marcus loans might appeal to some borrowers who want to save money on fees, if they can find a competitive rate from the service.

“Unlike a lot of fintech players, we don’t have any origination fee which we charge to the customer. Then, we also don’t have a prepayment fee,” Talwar said. “We also don’t have a late fee.”

Consumers, he added, “are very skeptical of somebody saying: no origination fee, but there are other fees. Or somebody saying: no prepayment fee, but there are other fees. Or there are some people who say: no hidden fees. So we have put a claim in our product saying no fees, period.