The financial world, as nuanced and fast-moving as it may be, is governed by rigid rules and protocol. Because of this, some people have difficulty getting access to funding.
Thankfully, the internet is breaking down lending walls and widening the marketplace for borrowers.
Let’s look at five companies shaking up the financial status quo by offering alternative lending services:
SoFi (Personal, Student and Mortgage Loans)
Navigating our financial worlds is complicated these days. Around 80 percent of Americans are in some form of debt when factoring mortgages, student loans, credit card debt, auto payments and more. With financial assistance only available to those with good credit scores, something had to change.
After all, countless people fall into debt and struggle to get out because of their low credit scores. A quick scan of Freedom Debt Relief reviews portrays a typical debt settlement customer as someone who can’t gain access to any more funding because of their low credit score, therefore limiting their options to settlement or personal bankruptcy.
Enter SoFi, which doesn’t use credit scores to qualify its applicants. Instead, the digital-only bank looks at things like estimated cash flow, career and education to assess the feasibility of a loan. SoFi doesn’t gouge borrowers on high interest rates, either, and even pauses repayments if a member goes through a period of financial hardship.
Mosaic (Home Improvement Investments)
Many people are reluctant to invest in their home for fear that the market will crash and they’ll be left sitting in what could have been liquid funds. Likewise, many mortgage refinancing strategies are risky, expensive, and require good credit.
Lending companies like Mosaic allow homeowners to make improvements that benefit the present and future. Things like solar installation, battery systems and other efficient home improvements help save money on utilities and attract future buyers, but they require significant upfront investments. Mosaic’s marketplace matches homeowners with contractors and provides flexible, low-cost financing options to kickstart more environment-forward projects.
Zopa (P2P lending)
Founded in 2004, Zopa is an OG of P2P lending companies. The product is simple: match people looking for low-interest loans with investors looking for high return rates.
Zopa charges a loan origination and servicing fees, which are deducted from borrower repayments as part of the loan APR. Investors should also take note that losses from bad debt are covered by a Zopa fund to keep return rates fairly stable.
Tala (Micro Loans)
A lot of alternative lending companies exist, but when one tries to redistribute some of the world’s wealth inequality, they become especially exciting. This is what Tala aims to do by approving borrowers with no credit history in developing countries with loans as small as $10 to as much as $500.
Tala has achieved an impressive 90 percent repayment rate to-date, and a big reason why is the 10,000 data points the software analyzes to make loan decisions.
Rapid Advance (Cash Advance Merchant)
Having a successful business idea but not the access to capital to nourish it is frustrating. Companies like Rapid Advance are the proverbial flower-watering can in this regard, providing short-term loans, lines of credit and cash-advance options to business owners with credit scores as low as 580. A business needs to have operated for a year and generate at least $5,000 per month to qualify. The longer an operation has been around, the better the offers.
For all the unknowns and lifestyle changes that technology brings, its ability to impact the world positively is unrivaled. These five alternative lenders merely scratch the surface of what’s possible in fintech with the right blend of an altruistic mission and software.