Varo brings several updates to its low dollar loan offer
- Varo is making several updates to its small loan offer.
- The changes are substantial for a product that was not announced until October 2020.
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Varo will be making several updates to its low-cost loan offering, Varo Advance, ranging from changing fees charged to redesigning underwriting for borrowers. United States
, which announced the changes in an email to customers, said they would go into effect on October 1, 2021.
The current fee schedule for borrowers is $ 3.00 for a $ 50.00 advance, $ 4.00 for a $ 75 advance, and $ 5.00 for a $ 100.00 advance.
Under the new fee system:
- Borrowers will no longer be capped at $ 100.00 in advance. They will pay $ 0.50 coupled with 4.7% of their principal amount, with the figure rounded to the nearest $ 0.50.
- Advances of only $ 20 will remain free of charge.
Varo Advance users who do not repay their loans will still not be affected by their credit and will not be able to borrow more, through Bank diving.
Varo also announced that it will integrate the linked bank accounts of its borrowers into its underwriting process for loans. The addition will allow Varo to examine external data such as direct deposit records and transaction history.
These are substantial changes for a product that was announcement in October 2020.
- At that time, the company introduced Varo Advance as a way to help people who need short-term cash assistance and as an alternative to overdrafts on their accounts.
- The product launch came just months after major U.S. banking regulators, including the Federal Reserve and FDIC, urged financial institutions make low-value loans available to help borrowers amid the coronavirus pandemic.
The redesign of Varo Advance gives the neobank two keys to supporting its lending operations:
- The integration of linked accounts allows Varo to test a new way of collecting data to inform its subscription. If the process works well for small loans, Varo could incorporate it into a range of potential lending products, such as credit cards, mortgages, or auto loans.
- The lifting of the loan limit of $ 100.00 on advances gives Varo more flexibility to work with borrowers. This can include people who don’t use neobank but need a forgiving short-term loan, and existing customers who may need to borrow more than a $ 100 limit to cover their short-term costs. term.
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