Startup Self Lender to Help Rebuild Credit

[ntx]

Another possible option for rebuilding?

http://techcrunch.com/2014/09/09/self-lender-wants-to-help-people-build-and-repair-their-credit/?nci...

[pizzadude]

Moved to Credit in the News

[Revelate]

I don't see anything to recommend this service over a traditional secured loan from any number of financial institutions at first glance through the article.

[pizzadude]

---

@Revelate wrote:

I don't see anything to recommend this service over a traditional secured loan from any number of financial institutions at first glance through the article.

---

I agree, nothing that couldn't be accomplished via a secured loan. However I think one of their target markets is the underbanked, who presumably couldn't access this due to lack of banking relationship.

[coldnmn]

I can see the possibility for someone who's credit is so poor they can't get a checking or savings account.

[ysenhunt25]

A person who credit is so bad that they dont have a personal checking account wont even care about starting off with this type of deal especially if there is no instant gratificaton or changes is to occur to their credit file- this is a good idea but it wont get to the avg consumer who doesnt have at the least a banking acct. These type of consumers dont even care about credit- they cash their check and live check to check- bill to bill-- 

[TheGardner]

I read this differently. With a traditional secured loan for say $1,000 which the bank holds as security. Then you actually receive the loan funds and pay interest.

This requires no start money which in turn you receive no immediate funding. At the end of 12 months with payments of roughly $86 per month you receive the $1000 funds.

This is more of a reverse loan. I can see how this would be useful in low income homes to establish credit and savings at the same time. 

I think underbanked in this situation means no access to loan/credit services. As this won't take care of a chexsystem issue so normal banking will remain difficult even with stellar credit. But credit products will be available.

Just my 2 cents but I can see this being usefull. Not just low income but mid income/no savings can use the loan "proceeds" to then open a secured card helping to further build a profile.

[SCF]

I think this would be a great product to pair with other savings incentives - like an Individual Development Account.  Essentially, for a very reasonable fee, the company is offering the benefits of a positive tradeline along with the simple benefits of putting $X/month aside.  The fact that it requires no initial capital beyond the first payment makes it a good fit for people with limited resources, and it has relatively little risk for the "lender" because all it really is is a savings contract.

Definitely a different approach, but I think that's welcome when we know that many people struggle to save and build good credit.

[waters]

Interesting... So I agree to have a savings account.. I make monthly payments to that savings account... Company takes $3/month and in exchange thru report a positive trade line to my credit report monthly.... Once my savings account is at the agreed
amount I get all my money back.

Am I missing something?

[TheGardner]

Nope, that's how I understood it as well. The side benefit is you could theoretically then open a $1k secured revolver. This program could be a great idea coupled with a secured card when loan matures (if I ran this company I would offer this) the real credit steps program