Advances in technology have had a significant impact on the way that many Americans work, shop, pay their bills and access entertainment. Technology has made it possible to shop for an insurance policy, purchase it online and receive immediate proof of coverage. For years, many lenders have offered online applications for everything from mortgages to credit cards. Today, there are many lenders offering online installment loan solutions, including some new lenders that are taking a fresh approach to the borrowing process.
Installment Loan Startup Lenders Go High Tech to Offer Financial Solutions
Currently, there are millions of Americans who qualify as distressed or subprime borrowers as defined by TheRoot.com. These are consumers who have bad credit or who have not established a credit history. They cannot qualify for a mortgage to purchase a new home, get approved for a credit card or qualify for a personal loan if they have a financial emergency.
With few options available to them, these borrowers have often turned to payday loans to help them handle an unexpected expense. Because payday loans are virtually never reported to credit bureaus, these loans do not help borrowers establish or improve their credit scores.
Installment loans, however, can help distressed borrowers build a positive credit history. In addition, installment loans, which are repaid over several months, are easier for most consumers to handle. Although monthly payments may vary by a few cents, each payment is very near the same amount, making it easier to budget for them. As an added bonus, the annual percentage rate is normally quite a bit lower than the rate charged on payday loans.
Recognizing that many Americans are denied access to sources of affordable credit, several companies have been founded to assist distressed borrowers. These companies are harnessing the power of technology to expedite the application process, which helps keep rates lower than many lenders with physical stores.
Examples of Startup Lenders Offering Installment Loans
The new lenders offering installment loans have some differences, but they share three beliefs.
• Every American deserves to have access to credit products that are not debt traps and that do not carry exorbitant interest rates.
• This type of access is not something that the government can simply legislate into existence.
• Private industry can provide credit products that are equitable, socially conscious and capable of improving the quality of borrowers’ lives.
Space does not permit a complete list of all of the startup lenders currently offering installment loans to those with imperfect credit. However, the following three lenders have already established excellent records of helping distressed borrowers.
• LendUp was founded to help borrowers improve their credit histories as well as provide access to affordable installment loans. As borrowers establish a record of making payments on time, they are rewarded with points that qualify them for lower interest rates on future loans. Once they earn enough points to qualify for the highest two tiers, LendUp begins reporting to the credit bureaus, enabling borrowers to improve or build a credit history. Many borrowers have successfully transitioned from loans that carried an annual percentage rate of 254 percent to loans that carry an interest rate of 34 percent or less.
• LendStreet offers consumers who are mired in debt the opportunity to rebuild their credit. This lender works with creditors to negotiate lower interest rates and discounts on existing balances. LendStreet then tailors payments that borrowers can afford, helping them get a fresh financial start. Virtually all borrowers find that their payments to LendStreet are substantially less than the total payments they were making to individual creditors.
• RISE offers installment loans, but the company also works with borrowers to help them understand and improve their credit. With transparent rates, the opportunity to qualify for lower interest rates on subsequent loans, free credit tools and flexible terms, RISE has earned a great deal of praise from borrowers.
Going Beyond Installment Loans
There are also startups that are dedicated to helping consumers improve their credit scores. For example, eCreditHero is a free service that helps consumers repair their credit. The company does not make loans or offer debt counseling, but it will fight to have erroneous or unsubstantiated negative information removed from your credit report.
Another interesting startup is Even. Even is designed for those who have a steady job and receive regular paychecks but whose paychecks can vary. Based on your recent paychecks or direct deposits, Even calculates a guaranteed amount that you will receive every payday. If your pay is less, Even deposits the difference. When you receive a paycheck for more than the guaranteed amount, Even pays itself back.
If you receive a high paycheck and do not owe anything to Even, Even recommends an amount to move to savings, and if you agree, the funds are moved into an Even savings account that you can withdraw whenever you like. Even does not charge any interest. Instead, it charges a subscription fee of $3 per week; the first 30 days are free. The subscription charge is the only fee that you pay.
Learn More About Innovative Lenders and Installment Loans
At Personal Money Store, we are committed to helping consumers make wise financial decisions. You can find many educational articles about installment loans and other types of credit by visiting our website.