Only at the best of times, you might be able to say payday loans are a necessary evil. However, a relatively new company is working to change that perception and offer borrowers a more optimistic approach to getting out from underneath a cycle of predatory loans.
LendUp was launched in 2012 with a mission to “provide anyone with a path to better financial health.” It has been called the “payday lender with a heart” for its willingness to work with borrowers to escape the debt trap. While LendUp seems to be leading the charge, there are also other companies looking to change the way payday loans are offered.
How LendUp Works
On the surface, LendUp looks like a typical lender. It offers short-term loans and charges a fee that translates into a high APR. A typical annual interest rate charged on a two-week loan is in the range of 391 to 520 percent. A starting interest rate with LendUp can fall within that range.
However, the average loan borrower takes out nine loans a year. Through its unique ladder system, LendUp gives borrowers a chance to lower their rates with each loan transaction. Borrowers who reach the top of the ladder can pay as little as 29 percent on their short-term loans. Here’s how it works:
When you apply for an initial loan through LendUp, the maximum you can borrow is $250 (may vary by state). If you are issued the loan, you start off in the Silver tier. You have 30 days to make the full payment, after which you can advance to the Gold tier.
In the Gold tier, you can borrow as much as $500 for as long as 60 days. You can make multiple payments on the loan and your annual interest rate is likely to be lower. For instance, if your annual rate at the Silver level was 300 percent, you could see your annual rate drop to below 200 percent with the Gold tier. You can then graduate to the Platinum level with an even lower annual rate and the opportunity to borrow up to $700 for up to six months.
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- Affordable Payments – Lower APR compared to other payday loans
If you reach the Prime level, you can borrow up to $1,000 for as long as 12 months. The Prime tier rate can be as low as 29 percent. In addition, your payments can be reported to the major credit bureaus which, if you make on time payments, can help your credit score.
Along the way, LendUp offers reward points for taking educational courses and referring friends. This can help move you to the upper tiers more quickly and qualify you for a lower annual rate.
LendUp Rates and Fees
While LendUp purports to offer lower annual rates than other lenders, you can still expect to start off with a triple-digit rate. As of December 2017, it’s starting annual rate ranges from 199 percent to 748 percent. It’s with your second and third loan that you can see a reduction in your rate.
LendUp also claims to be more transparent when it comes to fees. It tells you upfront what you will pay and there are no other hidden fees. You will pay an origination fee of 1 to 5 percent that varies by state, and a verification fee of around $5. Other fees include $15 for non-sufficient funds. There is no prepayment penalty unless you use a debit card for the payment. Fees vary from state to state.
You won’t pay a late fee as long as you let LendUp know in advance you are having trouble making the payment. LendUp can grant you a 30-day extension on the loan.
Applying for a loan from LendUp works like other lenders – you fill out a short application online that includes your contact information, banking information, Social Security number, and proof of income. LendUp doesn’t do a hard pull of your credit, but it does want to verify that you have the capacity to repay the loan, so it will want to see a copy of your paystub or a bank account statement showing direct deposits. You can get a decision in as little as a few minutes. If you are approved for a loan, the funds can be transferred to your checking account within 15 minutes for an additional fee; otherwise you can expect them within one business day.
The Bottom Line on LendUp
As you can see, LendUp has taken a “socially responsible” approach to a controversial lending market. They are still expensive, but the company wants to create a path for troubled borrowers to eventually get out of debt and even provide a way to build up their credit. It’s a good choice for people who can’t otherwise qualify for a personal loan, and who are willing to work their way up the ladder and out of debt.
Companies Like LendUp
Comparing LendUp to Rise Credit
|Rates (APR)||202% – 310%||36% – 365%|
|Loan Terms||N/A||Up to 26 months|
|Loan Amounts||Up to $1,000 depending on tier||$500 – $5,000|
|Fees||Origination fee: 1% – 5%||Origination fee: 1% – 5%|
Rise is also a relative newcomer to the payday loan industry, and it too takes a socially responsible approach to helping borrowers get out of debt. Like LendUp, Rise offers a point system that can lower your annual rate each time you borrow. Points are awarded for repaying your loans on time and for taking personal finance courses along the way.
With Rise, you can borrow between $500 and $5,000 for terms of up to 26 months. The APR can range from 36 percent, for seasoned borrowers who have demonstrated on time payment capacity, to 365 percent as an initial rate for new borrowers. Rise charges an origination fee of 1 to 5 percent depending on your state and a late fee of 5 percent of the unpaid amount. All fees can vary by state.
Rise also offers access to its Free Credit Score Plus service along with other tools to assist customers in improving their personal finances. Your payments on a Rise loan will be reported to the credit bureaus.
Applying for a Rise loan is similar to LendUp’s process, the difference being that Rise does conduct a credit check. It takes just a few minutes for a decision and funds are deposited into your checking account the next day.
Rise is a good choice if you want more flexibility in repaying your loan and you are a stickler for good customer service.
Comparing LendUp to OppLoans
|Rates (APR)||202% – 310%||99% – 199%|
|Loan Terms||N/A||9 – 36 months|
|Loan Amounts||Up to $1,000 depending on tier||$100 – $10,000|
|Fees||Origination fee: 1% – 5%||Origination fee: N/A|
OppLoans is another short-term lender seeking to change the industry with a unique business model. OppLoans offers installment loans with terms of 9 to 36 months. The loan amount can range from $1,000 to $10,000 with a possible APR of 36 to 199 percent.
While its APR at the high end is much lower than most other payday lenders, OppLoans does take a harder look at your credit than other lenders. OppLoans also considers other factors, such as your employment and income history, the loan amount, and the state of residency in determining your initial APR. The average APR on loans issued by OppLoans is 99 percent. OppLoans does charge origination and other fees, all of which vary by state. On average, the total fees paid add up to about 15 percent of the loan amount.
OppLoans is a good choice if you would rather repay your loan over time instead of within weeks. The big consideration is that, although your APR might be lower than other methods of financing, your total interest costs increase the more time you take to repay the loan.
Author: Jeff Gitlen
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