LendUp focuses on underserved, issues $2B in loans

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Installment lender LendUp, which targets customers underserved by the credit system, has hit a milestone of $2 billion financed through the platform. It’s delivered 6.5 million loans since its inception in 2012.

LendUp CEO Anu Shultes touts the platform’s ability to reach a consumer base that typically can’t access personal loans from big banks. The company confirmed its loan issuance milestone in late January.

“Through our lending, education and savings programs, we’ve helped customers raise their credit profiles by hundreds of thousands of points cumulatively and saved them hundreds of millions of dollars in interest and fees from much higher cost products,” Shultes said in a statement. “While there’s much more for us to accomplish, this milestone is a real testament to the impact that financial service providers like LendUp can and should have.”

Instead of relying on a FICO credit score for underwriting new customers, LendUp works with a team of data scientists on an alternative model that uses a larger swath of data points to assess risk for customers who have difficulty accessing credit.

“We know how to take a group of customers with similar credit scores and differentiate with who should get a loan and who shouldn’t,” Shultes told Bank Innovation. “[Those customers] know we’re here for them — it’s a sort of judgement-free zone.”

This milestone comes a year after the company split into two entities: LendUp, which continues to oversee the company’s installment loan business, and Mission Lane, which looks after LendUp’s previous card business.

See also: Aura is using grocery stores to market installment loans to the underbanked

Shultes explained that the split occurred as a “function of the market.” The company said it’s now focusing on credit-challenged consumers.

“It’s a great outcome to have: two sister companies that both have the same mission, but with different approaches to doing it,” she said. “One is focused on small dollar loans and focusing on the income volatility, and then you have a credit card business that’s also highly rated.”

LendUp’s APRs depend on the state, but a look at LendUp’s sample fees for California on its website shows annualized interest rates for new borrowers range from 214% to 459%, depending on the amount loaned and the repayment time frame.

While installment loans have been critiqued for allegedly high APRs, Shultes said that characterization isn’t correct. She said LendUp offers its customers opportunities to build credit and access more favorable terms with time.

Customers “pay us back at the amount they borrowed plus a fixed fee, and so from our point of view, it’s really a fee-based product,” Shultes said. “When you convert that fee to an APR, depending on whether they borrow for seven days or 30 days, the annualized percentage rates can vary.”

LendUp, which is based in Oakland, Calif., was founded in 2012, and has raised more than $300 million in funding to date.

As Shultes looks to the future of LendUp, the company is evaluating how it will create new, inclusive financial programs that protect consumers from overdraft fees or insufficient fund fees. As the company looks forward, she said she hopes it can increase the number of offerings for underserved consumers.

“Today, an underserved customer has a checking account, but not a credit card [and] no place to get a loan. “If the [digital-only] banks start offering loans by partnering with us, as an ecosystem, we should be able to provide a full set of services for this customer,” Shultes said.

Anu Shultes will speak at Bank Innovation Ignite on March 2-3 in Seattle. Shultes will share her insights and experience on embedded finance and the automation of “everything financial.” On that panel, she and others will discuss how automation can be used to create solutions, the role of people in the delivery of automated finance programs and limitations of the technology. Bank Innovation Ignite is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. Request your invitation.