LendUp is a small payday lending firm which was initiated by a microfinance expert three years back. This firm is helping borrowers in building strong credit and guiding them for better credit facilities from banks and other local loan providers. Mr. Orloff, initiator of this firm believes that borrowers can become strong financially and technically after practicing good credit borrowing techniques.
Being a microfinance expert in the World Bank himself, Orloff and his wife are well determined to guide people towards the right path of loan borrowing. At the moment, this microfinance start up offering borrowers personal loans for people with bad credit and believes that their customers will be confident to practice mainstream banking facilities, credit card grants, unsecured loans and even mortgages very soon.
LendUp along with its biggest rival startup Elevate are collectively targeting the payday lending industry in the Fort Worth of Texas. The payday lending is believed to be the grubbier corner of the total US debt market. This market has an annual turnover of about $3.2 trillion. LendUp and Elevate are offering small loans to borrowers who fail to qualify for loans with big lenders like Prosper, SoFi and Lending Club. ‘Payday loans are meant to bridge the gap between two consecutive pay cheques while instalment loans are meant to solve financial problems for a month or two’, said Orloff. According to a report by The Pew Charitable Trust, 27 states in America have allowed single time repayment loans which often come with a higher interest rate of around 391 percent on annual basis.
“Borrowers taking payday loans are the ones left with very limited choices. So, ultimately they end up opting for tough to repay and high interest payday loans” – believes Frank Rotman, a partner at QED Investors which is also a backer of LendUp. UK has imposed strict regulations on the payday lenders to follow ethical lending practices but in America, this move has only came forward in form of a draft proposal by the Consumer financial Protection Bureau (CFPB).
The borrowers would be provided payday loans only after confirming their ability to repay back the same on time. Also, there would be restrictions on the total number of loans a borrower can opt for per year. Most probably, it would be from six to twelve per year. Payday lenders will also have limited number of attempts to check the borrower’s account without prior authorization for collecting their payback installments.