8 ms·

LendUp (YC W12) Scores $150M for a Credit Card That Won’t Screw You Over

56 points by pavornyoh 11y ago

dannylandau 11y ago
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 11y ago
  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.
samstave 11y ago
Anyone from LendUp on here? I want to talk to you.
spydertennis 11y ago
great article. sounds like sasha and lendup are in business for all the right reasons. hopefully their story inspires more like them.
callmeed 11y ago
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.
- interesting_att 11y ago
  Did you see an improvement in your credit score?
- samstave 11y ago
  Can you explain your process and your results?
- username_in_use 11y ago
  This is a horrible way to build credit. You are literally throwing money in the trash. Go get a secured credit card.
  - rdl 11y ago
    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.
danieltillett 11y ago
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 11y ago
  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_Credit_Card/ https://www.techcu.com/Personal/Global_Members/CreditStart_C... 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-states.html https://www.americanexpress.com/global-card-transfers/united... 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.
  - danieltillett 11y ago
    The USA credit score system is completely crazy. When I was in the USA on sabbatical a few years ago even opening a bank account was a nightmare. In the end I was only able to do so because I had a Citibank credit card here in Australia and Citibank USA recognised me. It still took the poor banker a few hours and about a dozen phone calls to various parts of Citibank to open the account.
  - pavornyoh 11y ago
    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...
    - 11y ago
ryporter 11y ago
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).
- jjn2009 11y ago
  This seems like a win-win to me, I can misplace my wallet/CCs a lot and would be very grateful for a way to lock down my cards temporarily. If used correctly by consumers this would massively reduce fraud done with the stolen plastic, I'd be interested to know how much of fraud is done with the actual card.
- ajju 11y ago
  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.
- pavornyoh 11y ago
  As a customer, that's really not very valuable to me It is an excellent feature and something consumers crave knowing they can curb fraud. Many companies are now doing this. Capital One has the lock card feature, Discover has the Freeze it feature among others and hopefully their video convinces you as to why it is a good feature. https://www.youtube.com/watch?v=Z0ZNAHZlkMY https://www.youtube.com/watch?v=Z0ZNAHZlkMY
- ceejayoz 11y ago
  > I'm only liable for up to $50 of fraudulent charges... While true, I locked my Simple card after a $20ish charge in the Dominican Republic, then initiated a support request asking about it. Simple's nice and refunds all fraud, but some banks I'd have saved $30 there. Plus, your not being liable doesn't mean you don't pay for it. We just pay indirectly - it's figured into the bank's fees, the interest rates they'll pay you on savings, etc. I like Simple, and I was happy to be able to stop it myself before they went and charged $1k somewhere else.
imaginenore 11y ago
This is f#$%ing ironic: https://tctechcrunch2011.files.wordpress.com/2016/01/lendup_mobile_photo.jpg https://tctechcrunch2011.files.wordpress.com/2016/01/lendup_... At only 392.38% APR, we "won't screw you over" in any other way.
- neffy 11y ago
  Exactly. Or a mere 29%! Would be interesting to know where the difference is coming from. Guess the poor will be staying poor.
- josinalvo 11y ago
  The first question to ask is: how much would be owed and a payday loan shop? The second question to ask is: what is the percentage of non-payment. What is the expected return of LendUp per customer? I don't know these answers... But asking is better than accusing
- chrismartin 11y ago
  https://www.lendup.com/ https://www.lendup.com/ Dragging the sliders around, the APR varies between 203% to 755%. Granted, these are risky loans offered to people with bad/no credit record. It seems that rates "as low as 29%" (still higher than a credit card but lower than payday-type loans) are only offered to repeat customers with a demonstrated repayment history.
- santaclause33 11y ago
  Short term loans have artificially high APR.
- markvdb 11y ago
  Payday loans and predatory loan interest rates are illegal in at least several EU countries, like Belgium for example (sorry, link in Dutch): http://economie.fgov.be/nl/consument/consumentenkrediet/Kredietkosten/Maximale_tarieven/#.VqQeCK9ifeQ http://economie.fgov.be/nl/consument/consumentenkrediet/Kred... Absolute max APR is 11.5%. Charge more, and the consumer can just walk away from your shark credit without paying any interest. I wonder if there's been any scientific research on the effects (or the absence!) of such legislation. Anyone?
chrismartin 11y ago
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 11y ago
  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 11y ago
    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.
    - surrealize 11y ago
      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 11y ago
        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.
bobby_9x 11y ago
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.

56 points by pavornyoh 11y ago

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 11y ago
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.

samstave 11y ago

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

spydertennis 11y ago

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

callmeed 11y ago

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.

interesting_att 11y ago
Did you see an improvement in your credit score?
samstave 11y ago
Can you explain your process and your results?
username_in_use 11y ago
This is a horrible way to build credit. You are literally throwing money in the trash. Go get a secured credit card.
- rdl 11y ago
  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.

danieltillett 11y ago

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 11y ago
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_Credit_Card/ https://www.techcu.com/Personal/Global_Members/CreditStart_C... 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-states.html https://www.americanexpress.com/global-card-transfers/united... 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.
- danieltillett 11y ago
  The USA credit score system is completely crazy. When I was in the USA on sabbatical a few years ago even opening a bank account was a nightmare. In the end I was only able to do so because I had a Citibank credit card here in Australia and Citibank USA recognised me. It still took the poor banker a few hours and about a dozen phone calls to various parts of Citibank to open the account.
- pavornyoh 11y ago
  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...
  - 11y ago

ryporter 11y ago

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).

jjn2009 11y ago
This seems like a win-win to me, I can misplace my wallet/CCs a lot and would be very grateful for a way to lock down my cards temporarily. If used correctly by consumers this would massively reduce fraud done with the stolen plastic, I'd be interested to know how much of fraud is done with the actual card.
ajju 11y ago
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.
pavornyoh 11y ago
As a customer, that's really not very valuable to me It is an excellent feature and something consumers crave knowing they can curb fraud. Many companies are now doing this. Capital One has the lock card feature, Discover has the Freeze it feature among others and hopefully their video convinces you as to why it is a good feature. https://www.youtube.com/watch?v=Z0ZNAHZlkMY https://www.youtube.com/watch?v=Z0ZNAHZlkMY
ceejayoz 11y ago
> I'm only liable for up to $50 of fraudulent charges... While true, I locked my Simple card after a $20ish charge in the Dominican Republic, then initiated a support request asking about it. Simple's nice and refunds all fraud, but some banks I'd have saved $30 there. Plus, your not being liable doesn't mean you don't pay for it. We just pay indirectly - it's figured into the bank's fees, the interest rates they'll pay you on savings, etc. I like Simple, and I was happy to be able to stop it myself before they went and charged $1k somewhere else.

imaginenore 11y ago

This is f#$%ing ironic: https://tctechcrunch2011.files.wordpress.com/2016/01/lendup_mobile_photo.jpg https://tctechcrunch2011.files.wordpress.com/2016/01/lendup_... At only 392.38% APR, we "won't screw you over" in any other way.

neffy 11y ago
Exactly. Or a mere 29%! Would be interesting to know where the difference is coming from. Guess the poor will be staying poor.
josinalvo 11y ago
The first question to ask is: how much would be owed and a payday loan shop? The second question to ask is: what is the percentage of non-payment. What is the expected return of LendUp per customer? I don't know these answers... But asking is better than accusing
chrismartin 11y ago
https://www.lendup.com/ https://www.lendup.com/ Dragging the sliders around, the APR varies between 203% to 755%. Granted, these are risky loans offered to people with bad/no credit record. It seems that rates "as low as 29%" (still higher than a credit card but lower than payday-type loans) are only offered to repeat customers with a demonstrated repayment history.
santaclause33 11y ago
Short term loans have artificially high APR.
markvdb 11y ago
Payday loans and predatory loan interest rates are illegal in at least several EU countries, like Belgium for example (sorry, link in Dutch): http://economie.fgov.be/nl/consument/consumentenkrediet/Kredietkosten/Maximale_tarieven/#.VqQeCK9ifeQ http://economie.fgov.be/nl/consument/consumentenkrediet/Kred... Absolute max APR is 11.5%. Charge more, and the consumer can just walk away from your shark credit without paying any interest. I wonder if there's been any scientific research on the effects (or the absence!) of such legislation. Anyone?

chrismartin 11y ago

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 11y ago
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 11y ago
  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.
  - surrealize 11y ago
    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 11y ago
      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.

bobby_9x 11y ago

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.