Sometimes life throws a little more at you than you can financially handle. Perhaps it’s a shift in career or an unexpected family transition that carries a large financial burden. Such situations may require you to apply for a personal loan from your financial institution or other loan provider. Unlike home mortgages, which the bank can lend while using the house as collateral if you were unable to make your payments, personal loans usually don’t require an individual to offer equal collateral. Because of this, personal loans are riskier for banks to issue, and they make up for this by charging high interest rates.
According to Nerdwallet, individuals with good credit may be able to secure a personal loan with a 10% interest rate, but those with fair to poor credit can expect rates to float between 11-36% APR. If you pay back a $10,000 loan with a 36% interest rate over the course of three years, you’ll be paying the bank an additional $6,489.44 on top of the $10,000 that you initially borrowed.
Leveraging an online crowdfunding model, WeFinance is offering a better way for individuals to secure personal loans, as well as offering contributors a way to make a profit on their contributions.
Think of it as loan borrowing without the hassle of applying through a bank, giving borrowers more control over establishing the loan and repayment terms, as well as what percentage rate they are willing to pay. The current rates on loans extended through the platform usually fall between four to ten percent.
WeFinance encourages borrowers to request loans directly from their own community, using participants’ real identities right from within their personal and extended networks. The benefit of earning interest as a lender is in turn enjoyed by real people that the borrower knows personally, instead of a bank.
WeFinance facilitates the monthly repayments to lenders, with transactions being transferred from the borrower’s bank account to their lenders. In order to build out this desired functionality, WeFinance turned to Dwolla and our White Label API for bank transfers* to implement this payment process in a way that fit seamlessly into their user experience.
‘WeFinance (wefinance.co) is a loan crowdfunding platform. We help borrowers save money on existing or new loans by borrowing micro-loans directly from their own community and others who believe in them. Thus, our payment solution needed to be easy to setup and intuitive for our end users, but powerful enough for us to manage suites of loans on our users’ behalf over months and years without requiring them to take action. And, because we’re in the business of saving people money, we can’t accept the exorbitant fees so many platforms charge.
Dwolla white label is the perfect solution for us. There’s no need for users to deal with any external payment accounts, and most of them use Instant Verification to link their bank account in seconds. Then, we can easily manage loan payments for them with Dwolla’s API, and transmit repayments back over time to each individual lender, whether it’s a $25 loan or $2500, without all the savings getting sucked up in transaction fees.’
Eric Mayefsky, CEO and Lead Developer, WeFinance
Could your platform benefit from implementing a flexible bank transfer solution that fits inside of your user experience? We’d love to help you design a tailored payment solution that suits your needs.
*UPDATE: WeFinance has been defunct and this Dwolla integration is no longer active.
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