This is what the future of personal loans looks like – With SoLo funds, no banks are needed
This is the second installment of Petrol Gas Fintech& series with FinTech sandbox and be Boston Fintech Week, 27-29 September. To read the first part, click here.
In 2022, DeFi, short for decentralized finance, is a term that gets thrown around a lot. Whether it’s a new crypto product or an alternative exchange, Projects know that using the word DeFi can excite potential customers and investors.
solo funda Los Angeles-based fintech startup, is embracing DeFi in a way other companies aren’t: by offering customers truly decentralized finance in a convenient way.
What SoLo Funds does
SoLo Funds offers a new way to lend and borrow money. When you need a personal loan, you typically 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 connects borrowers and lenders directly. If you have $500 lying around, you can lend it to someone who needs it through SoLo Funds and get your money back plus a tip.
“We have found that credit for unplanned expenses is scarce,” said SoLo Funds co-founder and chairman Rodney Williams said. “It is really these unplanned expenses that produce disproportionately negative outcomes for the average American.”
Most loans are short term, up to 35 days and for a few hundred dollars.
How does SoLo Funds screen borrowers?
Most lending companies have a way of determining whether a potential borrower is likely to repay their loan. SoLo Funds is no different.
Rather than using credit scores, which can be misleading, SoLo Funds looks at an individual’s cash flow, which is a more accurate measure of the likelihood of repaying a loan.
“We think credit scores definitely don’t do a good job of assessing risk when a loan is for emergencies,” Williams said. “Most of our SoLo score is based on cash flow data.
“We take the last 24 months of banking history on Plaid and from that we build our risk score. Our payback rates are three times better than the traditional market average.”
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