San Francisco-based LendUp, founded in 2012, touts itself as a viable alternative to traditional payday loans. Payday loans are short-term loans availed at high interest rates by people who cannot get traditional low-interest loans from banks and credit unions due to bad credit history.
On LendUp.com, you can see an offer for a loan of $200 for 14 days at 29% APR. This means you need to repay $228.90 after 14 days. Unlike payday loans, you cannot roll over the debt into new loans. But, you can get another loan if you have repaid the earlier one.
LendUp offers a Credit Ladder
LendUp’s CEO, Sasha Orloff, says the company’s goal is to prevent customers from getting addicted to high-interest, short-term loans. Instead, they can build their creditworthiness at LendUp and become eligible for an installment loan. This loan offers a maximum of $500 for three months. There is a 5% application fee and the monthly interest rate is just 2%. Customers can get discount if they pay off their loan early and for completing online courses on credit education.
A Social Initiative
LendUp aims to improve the credit rating of its customers by giving credit bureaus information about timely repayments. Orloff’s inclination towards social betterment comes from his background of working with Grameen Bank in Latin America. He also had a stint with CitiGroup.
LendUp is funded by a host of investors including the Start Fund, Bronze Investments, Thomvest Ventures, Google Ventures, Andreessen Horowitz and others. Orloff is aided in the venture by his step-brother Jacob Rosenberg who previously worked at Yahoo! and Zynga.
Mining Data from Social Channels
LendUp is aware that payday loan takers are forced to borrow high-interest loans because of their bad credit history. To solve this problem, LendUp tries to use social media to gauge the creditworthiness of a borrower. It peeks into their Facebook and Twitter profiles for this purpose. LendUp uses social media to verify if the provided details are correct, and to cross-check data like education and employment history.
LendUp also looks at borrowers’ social media relationships. It looks at how long they have been using the account, how many friends they have, and whether the friends live nearby. A strong and close geographic network is a plus point as it indicates the loan candidate has a good support network.
LendUp also evaluates how often borrowers’ post about their friends and the frequency of their friends’ replies. A robust online social life indicates stability which means the borrower is more likely to repay the loan on time. In the good old days, your banker in the neighborhood bank would know all about you. Today, LendUp tries to use the same strategy using data collection and analysis tools on the internet to find out the community ties of a customer. LendUp uses this information to help people who have been left out of the lower-cost traditional loan market.
A Look at LendUp.com Website
You can apply for a loan at LendUp.com by creating an account. The approval decision is made almost instantly and the lender says you can have the amount in your bank account in just 15 minutes. Now, customers don’t have to run around looking for a lender at unearthly hours as LendUp.com is always online to help them anytime.
How to Earn LendUp Points
LendUp.com also offers information on how customers can earn points and climb up the credit ladder. Customers get 125 points for their first loan and for completing each online education course. If they repay the loan on time, they get 1000 points. For an extension, they get 500 points (up to 1000 points per month).
As customers accumulate points, based on their state of residence they get status levels such as Silver, Gold, Platinum, and Prime. The higher their rating the more discounts and offers they get on their loans.