There are over 100 million people in the U.S. living paycheck to paycheck. Seventy percent of Americans have less than $1,000 saved and 45 percent have no savings at all. For many Americans, this story will sound familiar: You’re squeaking by, then the inevitable happens—you get a flat tire. You need a few hundred dollars to fix your car so you can continue to make it to work; missed wages would mean you won’t be able to pay rent. You had trouble paying off your last loan—or you’ve avoided credit entirely—so your credit score is low. Ironically, you are one of the people who need credit the most, but for whom it is also the most expensive. Payday loans often cost $15 for every $100 advanced, but that’s still better than missing work. The little savings you may have had is likely depleted due to loan payments. If you’re lucky, maybe you pay off your loan and find yourself just a little worse off, a little less prepared to sustain the next financial challenge. And this unfortunate cycle continues…
When you’re living paycheck to paycheck, you likely know you could be making better financial decisions, but how? Who has the time? The system seems designed to be overly confusing, hitting you with unpredictable fees and further contributing to your financial stress. Then, at the point when you need to choose a new financial product—when you need a loan, for example—your options often range from bad to terrible.
That’s where SeedFi comes in. SeedFi’s initial product addresses two critical needs: borrowing (fix your car now!) and saving (create a buffer for the future). Here’s how it works: a borrower will come to SeedFi. The team relies on decades of expertise in evaluating risk to extend credit to a customer that is traditionally hard to underwrite. SeedFi determines how much to lend, as well as the proportion of dollars to give as money now vs. savings. For instance, a typical SeedFi plan might be structured as $500 right now and $500 reserved in a savings account. The borrower pays off $1,000 over time, and at the end of the plan, he or she has $500 in a savings account. Not only has the borrower paid a lower interest rate, he or she is in a better financial position after making the decision to borrow money.
The team behind SeedFi is uniquely positioned to develop financial products to serve Americans in desperate need. CEO Jim McGinley began his career in risk at Capital One before moving on to Oportun, then Aura, devoting his professional life to providing transparent, affordable credit to the people who need it most. Jim’s cofounder, Eric Burton, pursued a similar career path—also at Capital One, Oportun, and Aura— with a focus on product strategy, customer acquisition and growth.
SeedFi is creating a suite of plans to address borrowers at various financial points in their lives. Customers can start by saving as little as $10 a paycheck through SeedFi’s Credit Builder Plan, which enables them to build credit while they save. For those in need of money, SeedFi’s Borrow and Grow Plan gives customers the cash they need now and sets them up to save for the future.
This is just the beginning. The team at SeedFi understands the needs of this massive, underserved demographic and has an exciting vision for how to serve them. We are proud to be investing in the next generation of financial products that helps borrowers overcome financial setbacks—and leaves them better off in the aftermath.
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