Elastic LOC (from Elevate)

The Good

Elastic is a “bank issued line of credit.”  What’s that mean?  A line of credit is a financial product that lets you borrow money whenever you need it without going through an application process or paying varying interest rates.  Once you apply and are approved, it is there for you to use when you need it.   Elastic is issued by lending platform, Elevate, and the actual funds come from Republic Bank.

• Payment cycles adjusted to match when you get paid (i.e. weekly, bi-weekly, once a month).
• Getting the money is super easy with Elastic. Funding in as little as one day.
• Improves your credit score as you pay it down

“Studies show 64 percent of non-prime Americans are unable to borrow $500 from family and friends for an urgent, unexpected expense….With so many Americans lacking emergency funds, Elastic is a safety net for our customers, and its flexibility is one of the key product features that has kept our customers happy when they need additional credit to deal with life’s emergencies.” said Jason Harvison, COO of Elevate.

The Bad

While your initial fee may be as little as 5-10% of the loan, you could end up paying much, much more.  If you don’t pay off the LOC balance within one billing cycle (so in the first month), you’ll owe a monthly fee on top of this.  This fee varies from $1 to $200 depending on your loan terms, and you will pay this every month until the balance is paid in full (click here for more examples of Elastic fees and how they work).  This can get very costly.   And perhaps this is the biggest downside to Elastic and any line of credit product:  it makes borrowing very easy.  That’s great if you just need some cash to hold you over until next month – it’s cheaper than payday and alternatives.  But the average Elastic borrower pays the minimum which means the loan is not paid for 10 months.  At that point, the borrower has paid enough in fees to make Elastic about as costly as taking out a payday loan.

• Hard pull on your credit to apply
• Expensive unless paying the loan off after one or two months
• Lines of credit can make it almost too easy to borrow money
• Debits your account twice per week, so you must manage your checking account balance

The Summary

Elastic is clearly a product that people like.  In four short years, consumers have borrowed over $200 million using Elastic and the parent company, Elevate, has gone public on the stock market.  However, that kind of success probably speaks more to Elastic’s ease-of-use rather than its affordability.