SoLo Funds announced on Tuesday the release of the new SoLo digital wallet. The wallet aims to make it easier for users to add funds to the loan platform and have a safe place to access funds from a loan.
The wallet is designed to give lenders more transparency in transactions and allow them to add and disperse funds more easily. For borrowers, they can have a simpler time access to funds and can use their wallet as their primary direct deposit account and other standard consumer deposit account functions.
With SoLo Funds, users can either apply for or finance loans from $ 50 to $ 500. Borrowers choose when they would like to repay the loan, as well as provide advice to the person financing the loan. According to SoLo, the average loan term is 15 days with a maximum of 35 days. Borrowers’ tips usually range from 3% to 10% of the loan.
According to the company, the average loan is about $ 240. Thus, the tip for such a loan could be from $ 7.20 to $ 24. Depending on the length of the loan (up to 35 days), it could be a worthwhile investment.
Users must first link their bank account and debit card to their wallet. They will then be able to deposit funds as they would in a regular deposit account and then be able to use these funds to lend money to borrowers. Borrowers will be able to withdraw the funds they received from the lenders on their linked debit card.
The company has plans to add its own debit card, but for now, users should use one they already have. SoLo also plans to integrate features such as early payment, interest-bearing accounts and a credit-creating tool in the coming months.
Helping those in need
SoLo Funds is an innovative company that seeks to empower underserved communities and individuals who need emergency cash but cannot turn to a standard lender to get it, either due to bad credit, bad terms or other factors.
“With SoLo, borrowers set their own terms, including when they are going to pay [the loan] back and what they will eventually pay for the loan, “said Rodney Williams, co-founder of SoLo Funds. ZDNet. “We wanted the borrowers to have all the power.”
Together with co-founder and CEO Travis Holoway, Williams wanted to solve a problem they both noticed in their communities. They realized that many Americans were having a hard time meeting their unplanned expenses and had few places to return. “With that in mind, we really felt that when we looked at the market, that no one came up with a real solution to meet that need,” Williams said.
According to the company, 82% of all members are from under-served communities. More than 60% of borrowers are women, 49% have a college degree, 22% are LGBTQ and 16% have a disability. SoLo Funds has nearly 450,000 members, with over 300,000 SoLo Wallet accounts and 110,000 monthly active users.
“We wanted [SoLo Funds] be community led. I grew up in communities where there was no Chase Bank or Bank of America, but there were many other things, such as checkout points. There was a lack of trust in financial institutions, so [SoLo Funds] he wanted to remove them, “Williams said.
He also said that when unplanned expenses arise, many people have little choice but to turn to financial aid. These include friends and family or payday loans, and when these do not work, some may resort to crime.
“We believe in solving real problems and building trust with consumers. For us, many of the banking services we operate are designed to make lending and lending better and easier,” he said.
Understanding the risks
SoLo Funds does not have a standard approval process. Users do not undergo credit or history checks, which makes it much easier to access funds than through a traditional lender.
Instead, users should link their bank account and debit card, as well as establish Know Your Customer (KYC) and other anti-money laundering (AMI) practices with SoLo, Synapse, and financial intermediaries. Plaid. All three factors need to be verified before you start lending or borrowing through the app.
SoLo then creates a SoLo Score for the user by analyzing the last 24 months of their banking data. The rating is greatly influenced by the user’s cash flows and trading history. The SoLo Score will decrease and increase depending on how responsible the borrower is with the loans he is requesting.
According to the company, this process works better than other alternative lenders, as it has seen a repayment rate three times higher than the industry average, with 9 out of 10 loans being repaid.
Users seeking to finance a loan can use the potential borrower’s SoLo Score to determine if they want to take out a loan or not. In addition, SoLo Funds provide lenders the opportunity to enroll in Lender Protection. With a 5% charge, SoLo will protect your loan in case it is not repaid on time and will credit the entire amount to your SoLo wallet.
“As you can imagine, this is an investment like any other. So it has risks,” Williams said. Users who do not repay their loan can no longer use the app until it is repaid, but their credit score will not be hit. “We made a decision as a company not to negatively affect the credit of our borrowers until we can positively affect it,” he said.
But that does not mean that there are no things to prevent loan defaults. If the loan is not repaid within the specified time limit, SoLo will be contacted and the borrower can work with the company to make the payment. If the loan is repaid within 35 days, the lender receives the loan in full. Except for 35 days, the borrower is charged with a late commission of 10% of the loan principal paid to the lender. However, according to the Frequently Asked Questions page, if the money is recovered after 35 days, SoLo receives a 20% loan recovery fee.
If the SoLo team fails to recover the funds within 90 days, the case is transferred to the third debt collection partner, who charges a 30% commission on any funds recovered. Borrowers can return to the platform as soon as the loans are repaid.
Although it seems high risk, again, SoLo offers Lender Protection to protect the loan against a 5% charge. Which, depending on the size of the loan, seems to be worth it to avoid the potential headache. There is also the SoLo Score system to assist borrowers to vet.
Much of the market is trust. By being incredibly focused on the borrower, SoLo Funds hopes that the borrowers will realize that they have much more to gain by paying the loan than by not paying.
“Even after the delinquency, we remain connected to the bank account of our borrowers, so we are able to work with them [to avoid default]. It’s one of the reasons our repayment rates are so high. We do not treat them like many other lenders. “We are trying to work with them,” Williams said.
Emphasis on financial education
Much of the SoLo Fund’s approach to lending also focuses on the financial literacy of its users. The application and Website offers a range of modules designed to help educate users on financial issues.
SoLo strives to bring financial literacy one step further than traditional banks. The company recognizes that while banks provide financial education resources, many of the things they teach consumers are not available to everyone, especially those in unserved communities.
“It’s extremely difficult when a bank does not give you a chance. People say, ‘You teach me how to do all these different things, but I can not get a credit card or I can not access these products.’ What [SoLo Funds has] “We understood how to give access to anyone and teach them the cost of capital,” Williams said.