
LendUp (YC W12) Scores $150M for a Credit Card That Won’t Screw You Over - pavornyoh
http://techcrunch.com/2016/01/22/the-loan-dolphin/#.4sfbucn:pYGg
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callmeed
I've been using LendUp regularly just in an attempt to help rebuild my credit
(I've never actually needed the loan). I think their service is fantastic and
I really hope they remain independent and true to their mission as they grow.

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username_in_use
This is a horrible way to build credit. You are literally throwing money in
the trash. Go get a secured credit card.

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rdl
Diversity of types of loan is worth it (card, installment debt). If you're
borrowing $1000 at 7% for a year it's on par with the fees for a secured
credit card.

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danieltillett
Does anyone know if they cater to the recent immigrant? The USA credit score
system is totally broken for people who have come recently to the country.

~~~
gst
It's not easy without credit score, but there are definitely options. For
example if you're in the Bay Area you can get a credit card from Tech CU:
[https://www.techcu.com/Personal/Global_Members/CreditStart_C...](https://www.techcu.com/Personal/Global_Members/CreditStart_Credit_Card/)

Also, if you've got an Amex card in your home country it might be possible to
use it to get another card in the US: [https://www.americanexpress.com/global-
card-transfers/united...](https://www.americanexpress.com/global-card-
transfers/united-states.html)

In addition, you can also apply for a secured credit card (e.g., from Capital
One) which will help you to get a credit score.

~~~
pavornyoh
This above... To add to what he/she said, to maximize your scores, you need at
least 3 credit cards reporting. For a newbie, you should be able to generate a
score within six months. BOA, Capital One and CUs are are good place to start.
Also if someone can add you as an authorized user on their cards also helps a
lot. Stay way from predatory lenders like First Premier and Credit One. Once
you get it, always pay your balance before statement cuts and let only 1%-9%
of the balance report to the bureaus. Do this and in six months you will be
qualified for unsecured cards...

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david-given
Leaving aside the fact that as a non-USian this all sounds completely
insane...

> Once you get it, always pay your balance before statement cuts and let only
> 1%-9% of the balance report to the bureaus.

...what does this mean?

~~~
erichocean
The latter means that the credit reporting agencies "evaluate" how you're
doing at specific times, so instead of paying off your card when it is due,
you can notice when they evaluate and pay it off _right before they check_. If
you do, try and pay off enough to have it below 10%, but above 1%, since
that'll give you the best evaluation (i.e. the highest credit score).

For anyone else, pretty much anyone with income can more or less fix their
credit in 6-9 months if you just work at it. It's a game, you can game it, and
get a good credit score.

(If you scoff at the notion of credit scores being "a game", realize that _it
's the whole point_. People who "care" enough about their credit score to
learn the game and play it are—by definition—good credit risks. So doing well
"at the game" is _exactly_ what credit providers want you to do.)

~~~
danieltillett
> People who "care" enough about their credit score to learn the game and play
> it are—by definition—good credit risks

Either that or they are fraudsters.

~~~
ars
The credit score is not intended to find fraudsters. It's intended to find
people with poor credit skills, but good intentions.

For fraud they have other tools.

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ryporter
I don't understand why Orloff is so excited about giving customers the ability
to easily lock and unlock their credit card. As a customer, that's really not
very valuable to me. I'd rarely use the feature, and it likely wouldn't save
me any money, since I'm only liable for up to $50 of fraudulent charges (and
haven't paid anything at all each time my number has been stolen in the past).

~~~
ajju
Many people (that I know / have known) frequently misplace their wallet and
then their cards are in this limbo state where it's unclear if they are stolen
and have to be replaced (expensive for the co., inconvenient for the customer)
or just not found.

Seems like a useful feature to me.

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bobby_9x
Banking software is outdated and lacks features, because there is tons of red
tape involved. It also took the banks decades and probably hundreds of
thousands of man hours to get the software to a level of acceptable security
that most likely won't be present in a startup with a handful of employees.

As we've seen with Bitcoin, the next new shiny piece of software isn't
necessarily better or more secure.

I just checked out: [https://www.lendup.com/](https://www.lendup.com/)

Here was a sample loan: $250, 30 days. With the base interest (which I assume
is without any lender checks) it is $43.30 with a 202% APR.

It replaces a credit score with another system that essentially does the same
thing, which is to evaluate your risk to the lender.

It's clever, and might save some time (which has never really been a problem
for me when I needed a loan and was poor), but is absolutely not any different
than a payday loan place.

In fact, here is a random payday loan site I googled:
[https://www.flashpayday.com](https://www.flashpayday.com)

The APR is in the same range, they just use a different mechanism to determine
your credit worthiness, which really makes no difference to the person
borrowing the money.

"Sasha says perhaps it’ll license its technology to other banks like it
planned to pre-pivot."

You just got done telling me that banks are evil, so you are going to take
your fantastic new technology to continue to enable this behavior? I don't
think banks are inherently evil, but this logic just doesn't make a whole lot
of sense to me.

"Sasha says he’d walk by it each day whispering under his breath, “you’re
going out of business.”"

Really? It seems you are doing the same thing. Payday loans actually help the
poor. The APR is huge (like on your site), because of the risk involved. There
is really no way around this without the lender losing a large percentage of
money invested.

It's either this, or not getting a loan at all...and when I was in a bad
financial time in my life, it saved me until my next paycheck.

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chrismartin
Have any consumer advocacy-type people compared LendUp's APRs and terms with
that of traditional payday loan companies? 203% to 755% APR for a first-time
borrower sounds comparable to what many others already offer. How much of a
better deal are you getting?

I would like to see payday/title loans and other debt traps legislated off the
market completely, and at those APRs, I don't see how this is substantially
different.

~~~
surrealize
It looks like it's comparable for a first-time borrower, as you say, and then
gets better as you build a history of repayment with them.

I haven't used payday loan services myself, but from what I've read, I have an
easy time believing that incumbents in that market don't use their own
borrower repayment information very effectively.

~~~
chrismartin
Often, people who fall into a debt trap start with just one reasonably small
loan, a few hundred dollars for a few weeks.

So if your first-time borrowers still pay 200-700% APR, then I don't see how
offering lower rates to people who have demonstrated their ability to repay
addresses the problem of people who are actually unable to repay falling into
this trap to begin with.

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surrealize
Okay, can we agree that lendup helps people who repay, and doesn't help people
who don't? Relative to existing payday loan services.

~~~
chrismartin
Yes, I agree. The moral issue is allowing people to take out loans that they
are unlikely to be able to repay, based on their personal finance history. I
don't (yet) see how LendUp does a better job of that for first-time borrowers
than any other payday loan company.

Perhaps this is addressed by limiting the first-time loan amount to something
small (like $250), and scraping the borrower's online banking statements as
part of the approval process in order to predict (based on the account
history) whether they are likely to be able to repay within a month. I don't
know.

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imaginenore
This is f#$%ing ironic:

[https://tctechcrunch2011.files.wordpress.com/2016/01/lendup_...](https://tctechcrunch2011.files.wordpress.com/2016/01/lendup_mobile_photo.jpg)

At only 392.38% APR, we "won't screw you over" in any other way.

~~~
Karunamon
Am I the only person that thinks representing a loan only designed to be held
for a week or two at an annual rate is about as useful as the weatherman
giving the forecast in degrees kelvin?

It's a payday loan. You pay it back plus $10-50.

And this is supposed to be "predatory"? Jeez. I'd have been screwed a few
times without these evil "loan sharks".

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neffy
There's an argument that could be made that capitalism is based on the idea
that those who understand compound interest are allowed to exploit those who
don't.

So no, you're not the only person who thinks that. And there are plenty of
people who want you to keep thinking that. Especially people with bright new
financial services apparently aimed at making the wealth gap even worse than
it is already.

Robbery by math.

~~~
Karunamon
You and I have tremendously different definitions of robbery. Every legitimate
payday loan outfit I've looked at is pretty much above board with what they
charge and how they work.

Borrow X, repay X + Y on Z date, usually no more than a month in the future.

So sure, if you feel fully informed consent is exploitative in any way.

~~~
neffy
And the entire population aced math in their well funded school system with
small class numbers and well paid capable teachers, so no worries.

I suspect we don't have different definitions of robbery so much, as of when
it's appropriate to take advantage of people's ignorance and when it isn't.
You'll understand better when somebody has taken advantage of yours.

~~~
Karunamon
How does this increasingly contrived person who has a job and paychecks/DDs
into a bank account (all three of which are prerequisites for most payday
loans) not understand _first grade_ math?

~~~
progressive_dad
I'm a perfect use case for this service, so I guess I'll tell you my story. My
credit score is pretty low. Low enough that I apply for high interest cards
with my bank and get rejected.

I have a high income and an equally high number of expenses. Each month I have
about 300-600$ in "discretionary" income. I also have a partner with a very
low income and a son. My partner is trying to get on her feet right now and
there is a high degree in variability with her income and needs. She has
recurring medical bills and there are constant one time medical expenditures
when you have a child. Not to mention birthdays, once in a lifetime kind of
events where your child gets to participate, there are family and friends that
are worse off financially and need help from time to time.

I don't like, respect, or particularly want to use my banking services. I
don't trust them but having a checking account is a requirement. Every time I
have 500$ it makes me sick to my stomach to imagine handing it over to them,
given the fees and backhanded tactics they use. I don't trust them. I imagine
I might get a secured credit card sometime, but handing over the 500$ and
waiting two weeks to a month for my own money back, again, just makes me kind
of sick.

This service would help me in an emergency, and help me build credit (if not
to the same extent as a secured credit card)

~~~
neffy
I totally sympathise, the US health system is just a disaster.

YMMV but - I had a US bank account (I was a foreign student, low income) for
10 years. Didn't cost me a cent. Made money on interest, and had a perfect
credit rating when I graduated. Found a small community bank that was free
provided you kept a minimum balance of $1000. Savings and Loan are an equally
valid alternative (not even sure what the difference is got the same service
from both - except the S&L would cash foreign checks for free).

Thing is, people think banks are evil for charging 14.5% APR for an unsecured
personal loan. But they think these guys are great for charging a minimum of
29% APR - but as far as I could see more like 200%+ for an unsecured personal
loan???

Holy math fail batman!

Don't bank with citizens or bank of america, and do your due diligence like
you would any other purchase. There are plenty of good banks out there who
would be happy to do business with you. Go in, ask to speak to the bank
manager, explain your circumstances, ask questions _you already know the
answer to_ to calibrate, and treat it like any other business arrangement.

You're right a secured credit card is also better than these guys, they'll
only charge you 27%APR or so. Still not as good as a bank.

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dannylandau
Great company! Wouldn't the same concept apply to those that cannot afford car
repairs for example? You provide credit to those that need to fix their cars,
however, the problem is that the auto-shop is incentivized now to upsell a
bunch of fixes you may not actually need. Any thoughts?

~~~
ayuvar
A lot of car dealerships nowadays will finance repairs or maintenance.

I don't know about how available the same kind of credit facility is to
independent mechanics (dealerships tend to be pretty cozy with
banks/financiers for obvious reasons), but that would probably be a good place
to start.

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samstave
Anyone from LendUp on here? I want to talk to you.

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spydertennis
great article. sounds like sasha and lendup are in business for all the right
reasons. hopefully their story inspires more like them.

