18 October 2017
visit www.response.ncr.com

Start-up uses social networks to provide a free alternative to payday loans

18 June 2014  |  1920 views  |  0 Source: Rainy Day Capital

Rainy Day Capital, LLC announced today the beta launch of its website, rainyday.org, which relies heavily on social media and networks to create an inexpensive alternative to payday loans.

The microlending site will provide short-term access to as much as $1,000 with no interest or fees for five days, up to four times a year.

"The inspiration for Rainy Day was the single mom working two jobs whose car breaks down, and there isn't enough money left in the checking account this month to get it out of the shop," said Hayden Hamilton, founder of Bright Light Ventures, the innovation incubator behind Rainy Day. "The goal is to create a rainy day fund for those who can't afford to create one for themselves."

In order to provide loans that are free to begin with, and then at rates a fraction of the 391% APR interest rate of an average payday loan, Rainy Day uses many of the practices pioneered by the microfinance industry making unsecured loans to low-income women and families in countries like Bangladesh, but Rainy Day uses social networks rather than village networks to do so.

Rainy Day requires a Facebook account to apply for a loan and relies heavily on the recommendations of current Rainy Day members when making a decision on new applicants. Members are also tied to the applicants they recommend, giving them additional benefits like lower fees when the applicant repays their loan on time, but slowing or even reversing those benefits if the applicant does not.

Rainy Day's fee structure is very different than other short-term lenders. Rather than charging a relatively large fixed fee upfront, Rainy Day charges a daily fee. Fees begin at $2 per day and decrease with every subsequent loan as a borrower demonstrates a repayment history. The structure was designed to encourage early repayment and provides borrowers with the opportunity to take loans at a small fraction of the typical industry rates, or even for free.

Default losses are by far the biggest expense for online lenders, often running in excess of 100% APR, or more than 100 times that of the microfinance industry. By reducing those losses, Rainy Day can provide much lower rateswer rates for borrowers.

Rainy Day launches its public beta site today in three states - California, Louisiana, and Tennessee - and hopes to make the services available in many other states later this year.

Comments: (0)

Comment on this story (membership required)

Related blogs

Create a blog about this story (membership required)
visit www.innotribe.comvisit www.vasco.comRegister now

Top topics

Most viewed Most shared
Ripple looks to drive bank adoption with $300m XRP rebate programmeRipple looks to drive bank adoption with $...
15309 views comments | 12 tweets | 4 linkedin
Swift positive on blockchain, but big challenges remainSwift positive on blockchain, but big chal...
8488 views comments | 16 tweets | 22 linkedin
hands typing furiouslyHow artificial intelligence can deliver a...
8001 views 0 | 7 tweets | 9 linkedin
satelliteGates Foundation backs Ripple collaboratio...
7525 views comments | 13 tweets | 9 linkedin
IBM uses blockchain to improve cross-border payments processingIBM uses blockchain to improve cross-borde...
6636 views comments | 8 tweets | 16 linkedin

Featured job

Competitive base, double ote, benefits
London, UK

Find your next job