SoLo Funds announced the release of its new digital SoLo wallet on Tuesday. The wallet aims to make it easier for users to add funds to the platform to send loans and have a safe place to access funds from a loan.
The wallet was designed to give lenders more transparency into transactions and allow them to add and allocate funds more easily. Borrowers have easier access to funds and can use the wallet as a main account with direct deposit and other standard consumer deposit features.
with solo fundUsers can apply for or fund loans ranging from $50 to $500. Borrowers choose when to repay the loan and tip the person funding the loan. The maximum loan period is 15 days. The borrower’s tip is usually between 3% and 10% of the loan amount.
According to the company, the average loan is about $240. So the tip for such a loan could be anywhere from $7.20 to $24. Depending on the term of the loan (maximum 15 days), it can be a worthwhile investment.
Users must first link their bank account and debit card to the wallet. You can then deposit money just like you would with a regular deposit account, and then use that money to lend money to borrowers. Borrowers can withdraw the funds received from lenders to their connected debit card.
The company plans to add its own debit card, but for now, users will have to use an existing one. SoLo also plans to add features like early payment, interest-bearing accounts, and a loan builder tool in the coming months.
help those in need
SoLo Funds is an innovative company dedicated to empowering underserved communities and individuals who need emergency money but cannot go to a typical lender to get it due to bad credit, unfavorable terms or other factors.
“With SoLo, borrowers set their own terms, including payment terms [the loan] back and what they will ultimately pay for the loan,” said Rodney Willams, co-founder of SoLo Funds ZDNet. “We wanted the borrowers to have all the power.”
Along with co-founder and CEO Travis Holoway, Williams wanted to solve a problem they both noticed in their own communities. They recognized that a large portion of Americans struggled to cover unplanned expenses and had few places to go. “With that in mind, when we looked at the market, we really felt like nobody was offering a real solution to this need,” Williams said.
According to the company, 82% of all members come from underserved communities. Over 60% of borrowers are women, 49% have college degrees, 22% are LGBTQ and 16% have a disability. SoLo Funds has nearly 450,000 members with over 300,000 SoLo wallet accounts and 110,000 monthly active users.
“We wanted [SoLo Funds] be community oriented. I grew up in communities that didn’t have Chase Bank or Bank of America, but there were lots of other things like check cashing offices. So there is a lack of trust in financial institutions [SoLo Funds] wanted to remove them,” Williams said.
He also said that when faced with unplanned expenses, many people have few avenues to turn to for financial help. These include friends and family or payday loans, and when these don’t work, some may resort to crime.
“We believe in solving real problems and building consumer confidence. For us, many of the banking features we release are designed to make borrowing and originating better and easier,” he said.
SoLo Funds does not have a typical approval process. Users are not subjected to any credit or background checks, making accessing funds much easier than through a traditional lender.
Instead, users must connect their bank account and debit card, as well as set up know-your-customer (KYC) and other anti-money laundering (AMI) practices with SoLo’s financial services broker, Plaid. All three factors need to be verified before you can start lending or borrowing through the app.
SoLo then creates a SoLo score for the user by analyzing the bank details for the last 24 months. The score is heavily influenced by the user’s cash flow and transaction history. The SoLo score will go down or up depending on how responsible the borrower is with the loans they apply for.
According to the company, this process works better than other alternative lenders as the repayment rate is three times higher than the industry average, with 9 out of 10 loans being repaid.
Users looking to fund a loan can use the prospective borrower’s SoLo score to determine whether or not to accept the loan. In addition, SoLo Funds offers lenders the opportunity to sign up for lender protection. For a 5% fee, SoLo secures your loan in case it is not repaid and credits the full amount to your SoLo wallet.
“As you can imagine, this is an investment like any other. So it has risks,” Williams said. Users who don’t repay their loan can no longer use the app until they’re paid, but their credit score won’t be affected. “We have made a decision as a company not to compromise the creditworthiness of our borrowers until we can positively impact them,” he said.
But that doesn’t mean there aren’t ways to prevent loan defaults. If the loan is not repaid within the stipulated period, SoLo will start contacting the borrower. If the loan is repaid within 35 days, the lender gets the loan back in full. Outside of the 35 days, the borrower will be charged a late fee equal to 10% of the principal loan amount payable to the lender. However, according to its FAQ page, SoLo charges a 20% loan repayment fee if the money is recovered after 35 days.
If SoLo’s team fails to recover the funds within 90 days, the case is escalated to their third-party debt collection partner, who charges a 30% fee for the funds recovered. At that point, the borrower will be permanently banned from SoLo Funds.
Although it may seem like a high risk, SoLo offers Lender Protection to insure the loan for a 5% fee. Which, depending on the amount of credit, seems worth it to avoid potential headaches. There is also the SoLo Score system to screen borrowers.
A big part of the market is trust. With its incredibly borrower-centric focus, SoLo Funds hopes borrowers will realize that they have far more to gain by paying the loan than by not paying.
“Even after default, we remain connected to our borrowers’ bank accounts so we can continue working with them. This is one of the reasons why our payback rates are so high. We don’t treat them like many other lenders. We’re trying to work with them,” Williams said.
Focus on financial literacy
A large part of SoLo Fund’s lending approach also focuses on the financial literacy of its users. The app and website offer a number of modules designed to educate users about financial issues.
SoLo seeks to take financial literacy a step further than traditional banks. The company recognizes that while banks provide financial literacy resources, many of the things they teach consumers may not be available to every individual, particularly those in underserved communities.
“It’s extremely hard when a bank doesn’t give you a chance. People say, ‘You teach me how to do all these different things, but I can’t get a credit card or access to these products.’ What [SoLo Funds has] We’ve figured out how to give everyone access, and we’re teaching them the capital cost,” Williams said.