Thanks to new legislation at the state level and increasing pressure from consumers, the way payday lenders operate is changing for the better.
LendUp represents a new generation of payday loans because it wants to do more than collect fees: it aims to help subprime borrowers on track to financial health.
Although LendUp issues high-interest rates and fees, it also offers some exciting products for those who can’t turn to the bank for help when they need extra cash.
Have you received one of LendUp’s mailers or seen their advertisements online? Keep reading to learn whether its promise stands up or if it’s too good to be true.
Who is Lendup?
Lendup is a relatively recent arrival on the loan scene. It began offering credit products to Americans back in 2012 to help Americans with poor or no credit get access to loans and credit cards.
They believe those Americans don’t have trustworthy options when looking for credit. So, Lendup offers:
- Credit cards
- Credit education
Each of its products offers a way for you to build your credit, steer clear of debt traps, and work towards your personal financial goals.
Who Qualifies for a LendUp Loan?
To qualify for a loan, you must be 18-years-old and a resident of one of these states:
LendUp doesn’t require a particular credit score. It doesn’t even check it during your application. All you need is a valid phone number, address, and a checking account to receive the money.
How does LendUp make decisions? Instead of pouring over your credit report, it looks at your bank transactions and uses Experian Clarity Services to make a decision.
Although LendUp doesn’t report average customer details on its site, a NerdWallet investigation found that the average customer profile features:
- A credit score of 550
- An income of $40,000-$45,000
- A debt-to-income ratio of 58 percent
You do need an income to apply for a loan, and LendUp asks for paper documentation of it during your application. It will also see what you earn when it scans your bank account.
Is LendUp a Payday Lender?
LendUp is a payday loan lender by another name. It can offer rates as high as traditional payday lenders, and the single payment loans match that description.
While LendUp limits how much you can borrow to avoid debt traps, it is still an expensive form of credit compared to traditional banking. You’ll learn more about rates and terms later.
How Much Can You Borrow?
LendUp doesn’t provide unmanageable loans, so you can’t apply for a loan you can’t pay back within a few weeks. The first loan you apply for is a single-payment loan, which means you pay it back in one lump sum.
The amount you may borrow ranges from $100 to $255. You’ll choose the date by which you want to pay it back, usually within four weeks of your application.
Rather than treating it as a payday loan to cover an emergency expense, the initial loans serve more like a credit building tool. So if you want access to cash and want to work your way up to becoming credit-worthy, you might start with a $100 loan and then pay it back.
How Long Does It Take to Get the Money?
The application takes a few minutes, and you get your decision immediately. It typically takes one day from approval to get the money because LendUp sends it via an ACH transfer to your checking account.
A same-day option is also available for some customers.
The LendUp Ladder
In addition to limiting the amount you can borrow to something manageable, LendUp also uses the LendUp Ladder to incentivize responsibly borrowing.
Details of the program vary according to state, but the general rule is this: when you borrow responsibly and pay back your loans on time, you unlock both higher borrowing thresholds and lower rates.
It works using a points-based system. You earn points by paying back your loan or passing the free credit education courses offered on your site.
For example, you earn 125 points for each course taken, and you receive a bonus when you finish six courses. Paying your loan on time earns you 1,000 points. If you need an extension and pay your loan on time to meet your extension, then you earn 500 points.
There are four tiers on the LendUp Ladder:
The products available at each level vary according to the state you live in.
What Are Lendup’s Terms?
LendUp’s terms change and improve as you continue up the ladder.
Your first loan will be the most expensive, and it will be a single payment loan. The example APR provided ranges from 229.43 percent to 917.71 percent. You pay a higher APR when you pay back the loan sooner.
For example, if you borrow $200 in a single installment loan for a week, you may receive an APR of 917.71 percent. That means you pay back a finance charge of $35.20 for a total of $235.20.
If you set your due date at a month from the day you borrow, then your APR is 229.43 percent. However, you still pay only $35.20 on top of the principal borrowed.
The bottom line: paying back the loan in a week doesn’t benefit you any more than paying it back in a month. That works in your favor because it gives you more time to pay it back without penalizing you.
The terms available to you depend on your place on the LendUp ladder and the state you live in.
The APR range for single-payment loans is 134 to 1,252 percent.
Once you graduate to installment loans, you receive rates of 30 to 180 percent.
The repayment schedule ranges from seven to 30 days for single-payment loans and three to 12 months for installment loans.
Is LendUp Right for You?
LendUp offers a range of credit products to those whose credit score sends the banks running scared.
If you want a way of building your credit, LendUp may help you out. That help, however, comes at a cost because its interest rates rival those of traditional payday lenders, particularly at first. However, if you borrow responsibly and pay back your loans, you can unlock some reasonable prices on small loans.
Are you looking for credit building products but aren’t sure where to start? Ask us to help you find a loan or credit card at a price that works for you.