SoLo Funds on Tuesday announced the release of its new SoLo digital wallet. The wallet aims to make it easier for users to add funds to the platform to send loans and to have a secure place to access loan funds.
The wallet is designed to give lenders greater transparency with transactions and allow them to add and disperse funds more easily. For borrowers, they can access funds more easily and can use the wallet as their primary account with direct deposit and other standard consumer deposit account features.
With SoLo Funds, users can apply for or fund loans from $50 to $500. Borrowers choose when they want to repay the loan and tip the person financing the loan. The maximum duration of the loan is 15 days. Tips to borrowers generally vary between 3% and 10% of the loan.
According to the company, the average loan is around $240. So the tip for such a loan could be $7.20 to $24. Depending on the length of the loan (with a maximum of 15 days), this could be an interesting investment.
Users will first need to link their bank account and debit card to the wallet. They can then deposit funds as they would with a normal deposit account, and then they can use those funds to lend money to borrowers. Borrowers will be able to withdraw funds received from lenders to their connected debit card.
The company plans to add its own debit card, but for now users will need to use one they already have. SoLo also plans to integrate features such as prepayment, interest-bearing accounts and a credit creation tool in the coming months.
Help those in need
SoLo Funds is an innovative company that seeks to empower underserved communities and people who need emergency cash but cannot go to a typical lender for it, either due to poor credit, adverse conditions or other factors.
“With SoLo, borrowers set their own terms, including when they will pay [the loan] return and what they will ultimately pay for the loan,” said Rodney Williams, co-founder of SoLo Funds. ZDNet. “We wanted the borrowers to have all the power.”
Along with co-founder and CEO Travis Holoway, Williams wanted to address a problem they had both noticed in their own communities. They realized that a large portion of Americans struggled to meet unexpected expenses and had little recourse. “With that in mind, we really felt when we looked at the market that nobody provided a real solution to meet that need,” Williams said.
According to the company, 82% of all members are from underserved communities. Over 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 driven by the community. I grew up in communities where there was no Chase Bank or Bank of America, but there were lots of other things, like check cashing places. There was a lack of trust when it came to financial institutions, so [SoLo Funds] wanted to delete them,” Williams said.
He also said that when unexpected expenses arise, many people have few options to turn to for financial assistance. These include friends and family or payday loans, and when these don’t work out, some may resort to crime.
“We believe in solving real problems and building trusting relationships with consumers. For us, many of the banking features we release are designed to make borrowing and lending easier and better,” he said. declared.
Understand the risks
SoLo Funds does not have a typical approval process. Users do not undergo credit or background checks, which makes it easier to access funds compared to a traditional lender.
Instead, users are required to connect their bank account and debit card, as well as establish Know Your Customer (KYC) and other anti-money laundering (AMI) practices with the facilitator. of financial services from SoLo, Plaid. All three factors must be verified before you can 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 score is heavily influenced by the user’s cash flow and transaction history. The SoLo score will decrease and increase depending on the borrower’s responsibility for the loans they apply for.
According to the company, this process works better than other alternative lenders, as it has recorded a repayment rate three times higher than the industry average, with 9 out of 10 loans paid off.
The user looking to fund a loan can use the potential borrower’s SoLo score to determine whether they want to take the loan or not. Additionally, SoLo Funds offers lenders the option to enroll in Lender Protection. For a 5% fee, SoLo will guarantee your loan in the event it is not repaid and credit the full amount to your SoLo wallet.
“As you can imagine, it’s an investment like any other. So it comes with risk,” Williams said. Users who default on their loan can no longer use the app until it is paid, but their credit rating will not be affected. “We have made the decision as a business not to negatively affect our borrowers’ credit until we can positively affect it,” he said.
But that doesn’t mean there aren’t measures in place to deter defaulting loans. If the loan is not repaid within the set time frame, SoLo will begin the process of contacting the borrower. If the loan is repaid within 35 days, the lender receives the loan in full. Outside of the 35 days, the borrower is charged a late fee of 10% of the loan principal payable to the lender. However, according to its FAQ page, if funds are recovered after 35 days, SoLo charges a 20% loan recovery fee.
If the SoLo team fails to recover the funds within 90 days, the case is transferred to its third-party debt collection partner, who charges a 30% fee for the recovered funds. At this point, the borrower is permanently banned from SoLo Funds.
Although this seems like a high risk, again SoLo offers lender protection to insure the loan for a 5% fee. Which, depending on the size of the loan, seems worth it to avoid the potential headache. There is also the SoLo Score system in place to help vet borrowers.
A big part of the market is trust. By being incredibly borrower-centric, SoLo Funds hopes that borrowers will realize that they have much more to gain by repaying the loan than by not paying.
“Even after a default, we stay connected to our borrowers’ bank accounts, so we’re still able to work with them. That’s one of the reasons why our repayment rates are so high. We don’t treat like a lot of other lenders. . We try to work with them,” Williams said.
A focus on financial literacy
Much of SoLo Fund’s approach to lending also focuses on the financial literacy of its users. The app and website offer a number of modules designed to help educate users on financial topics.
SoLo tries to take 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 may not be available to all individuals, especially those in underserved communities.
“It’s extremely difficult when a bank doesn’t give you a chance. People say, ‘You teach me to do all these different things, but I can’t get a credit card, or I can’t access these products.’ What [SoLo Funds has] figured out how to give anyone access, and we teach them the cost of capital,” Williams said.