Pay day lending alternative platform LendUp announced it received a new round of funding led by Google Ventures.
The company’s value proposition is to lend up to $250 for up to 30 days letting its customers select the re-payment date so it’s not necessarily linked to the pay day itself nor debited automatically from users’ paychecks.
The other advantage they offer is to actually approve borrowers loans in minutes and even depositing the money into customers’ accounts immediately.
But the best part of the company’s service is their focus to help users build their credit with their “LendUp Ladder” where customers get bigger loans as they show their good track records and this information is submitted to national credit bureaus.
In this Interview Sasha Orloff, LendUp’s co-founder and CEO, talks about the new funding round and the plans for the near future.
We spoke about:
– The $14 million round and the investors: Google Ventures, QED, and Data Collective.
– Recap: What is LendUp?
– How does the service help borrowers build credit?
– How will the new money raised be used?
– Expanding nationally?
There are people who borrow money and people who save money and they all used to go to the bank, but now that is changing, you can lend directly to the borrower and for this there is LendingClub.com, a peer to peer loans marketplace.
The mechanism is that instead of going to a bank to deposit your money or to apply for a loan you go to a place where depositors meet borrowers directly. On Lending Club you can browse and select who you want to lend to. You can lend to a few borrowers or to many so you can diversify your risk.
If you need to borrow, you go to Lending Club, enter your information and they do a risk analysis and rate you as a borrower. No matter what is your credit risk level the cost of your loan, the rate, will be lower than a bank.
As an investor the return you get is much higher than a bank also: Lending Club investing has yielded between 5% and 12% depending on the borrower ratings since it started while banks have been paying no more than 1%.
In today’s digital economy it doesn’t make sense to stash your money only at a bank any more, there are many new options to bypass the middleman and peer to peer lending is one of them.