LendUp

The Good

LendUp’s mission is “to expand access to credit and lower the cost of borrowing for the millions of Americans that traditional banks are typically unable to serve.”  How do they do this?  By eliminating roll-over fees, offering a better online consumer experience with clearly explained loan due dates, and educating the borrower on how to make better financial decisions.

Loans are between $100 and $250 and typically run from 7 to 30 days.  The shorter the time period to pay them back, the lower the amount you’ll owe.  APRs range from 206.83% to 773.80%, depending on the state where you live and the loan you accept, and this is pretty similar to what you’d see from other payday lenders.  However, existing customers who have a history with LendUp can also qualify for installment loans which have APRs as low as 29.99% and give you up to 12 months to pay back.

• LendUp does not charge any roll-over fees
• Can sometimes offer 30-day extensions and does not charge fees on them
• Committed to the consumer experience

LendUp also “gameifies” the consumer experience to make understanding the loan and its terms a more “fun” experience.  There is a “LendUp Ladder” that lets you earn points and move up its tiers: Silver, Gold, Platinum and Prime.  Typically, a payday loan will not help you improve your credit history.  But at the LendUp Platinum and Prime levels, they begin reporting your repayment history to the major credit bureaus, and this actually will improve your credit score (eventually).   Finally, LendUp is a direct “balance sheet” lender.  This means that they are lending you their own money and not simply acting as an intermediary between the borrower and some other lending entity.  That’s important when it comes to ensuring that the rate you receive is the rate you think you are receiving, and it also means they have more ability to offer an extension on a loan.

The Bad

• Credit reporting at the Platinum and Prime levels is not an option in all states.
• Maximum loan offered is $250
• High APR rate for first loan. The rate decreases once you’ve been a customer for several months.

LendUp entered the payday loan space with promises to revolutionize the industry.  They committed to not charging borrowers rollover-fees, which is one of the traps of a payday loan, and also focused upon financial education to help the borrower make better decisions.  By any objective measure, they’ve followed-through on these promises for a better consumer experience, however, they’ve fell short when it came to marketing tactics.  In late 2016, the Consumer Financial Protection Bureau opened a case against LendUp and eventually ordered them to pay $1.83 million.  This was because they advertised low rates available only to California residents – but to borrowers in states other than California.  That’s definitely a black spot upon the company, but in the scheme of fraudulent marketing, this is actually pretty mild.  And we think the CFPB’s settlement of only $1.83 million suggests the same (this is a very small amount given that LendUp had raised over $100 million in funding).

The Summary

LendUp is definitely unique in how they operate, but they are still very much a for-profit company that needs to make money.  That is not a bad thing; it simply means that borrowers still need to be diligent about paying back their loans on time, understanding what they are signing up for, and only borrowing the minimum amount needed.