What the Future of Personal Loans Looks Like – With SoLo Funds, No Bank Needed
This is the second part of Fintech from Benzinga& series with FinTech sandbox and his Boston Fintech Week, September 27-29. To read the first episode, click here.
In 2022, DeFi, short for decentralized finance, is a term that has been circulating a lot. Whether it’s for a new crypto product or an alternative exchange, projects know that using the word DeFi can excite potential customers and investors.
SoLo Fundsa Los Angeles-based fintech startup, embraces DeFi in a way other companies don’t: bringing truly decentralized finance to customers in a convenient way.
What SoLo Funds does
SoLo Funds offers a new way to lend and borrow money. Typically, if you need a personal loan, you go to a bank or lender and sign a contract to borrow a certain amount of money and agree to pay a certain amount of interest and repay the principal at the end of the term.
Instead, SoLo Funds directly connects borrowers and lenders. If you have $500 in reserve, you can lend it through SoLo Funds to someone in need and then receive your money and a tip in return.
“We discovered that loans for unexpected expenses are rare”, co-founder and president of SoLo Funds Rodney Williams said. “These unforeseen expenses are really what is causing disproportionate negative outcomes for the average American.”
Most loans are short term, up to 35 days, and for a few hundred dollars.
How does SoLo finance veterinary borrowers?
Most loan companies have a way of determining if a potential borrower is likely to repay their loan. SoLo Funds is no different.
Instead of using credit scores, which can be misleading, SoLo Funds looks at a person’s cash flow, which is a more accurate measure of their likelihood of repaying a loan.
“We think credit scores definitely don’t do a good job of assessing risk when a loan is for emergency needs,” Williams said. “The majority of our SoLo score is based on cash flow data.
“We ingest the last 24 months of banking history through Plaid and that’s what we use to build our risk assessment score. Our reimbursement rates are three times better than the traditional market average.”
Photo: fizkes via Shutterstock