Fig Loans changes the way people with low credit experience banking by offering emergency loans and financial stability products in a socially responsible way.
The company provides borrowers with products that improve their creditworthiness, such as credit reporting and loan structure similar to a home mortgage. To be considered for a Fig loan, one must complete an online application and verify their bank account. Fig will then look at the ability to pay back the loan, rather than a credit score, and focus on account age, income, and existing/previous loans.
Why Fig Loans?
Fig Loans takes aim at a massive problem within payday lending, which makes it a natural fit for our Innovative Finance area of focus. We are seeking products that lead to greater financial inclusion, which calls for, among other things, better financial literacy and quality offerings.
For those unaware of the payday lending epidemic, this article from The Atlantic describes a payday loan as follows:
“Payday lending works like this: In exchange for a small loan—the average amount borrowed is about $350—a customer agrees to pay a single flat fee, typically in the vicinity of $15 per $100 borrowed. For a two-week loan, that can equate to an annualized rate of almost 400 percent. The entire amount—the fee plus the sum that was borrowed—is due all at once, at the end of the term. (Borrowers give the lender access to their bank account when they take out the loan.) But because many borrowers can’t pay it all back at once, they roll the loan into a new one and end up in what the industry’s many critics call a debt trap, with large fees piling up.”
Fig Loans is committed to low fees and an amortization schedule mimicking a mortgage, as opposed to a flat fee and short repayment period. This, in effect, can avoid the debt trap without limiting access to capital.
In addition to structural differences, Fig Loans is skilled at predicting events of default. This handy talent serves to inform loan recipients and influence spending behavior.
How We Helped
We made an equity investment into Fig Loans through the Village Capital FinTech 2016 cohort. The investment came alongside other investors and funded their go-to-market strategy. This investment fits our initiative to promote financial inclusion by creating an innovate way to alleviate debt and improve access to better credit-based financial products