About SoLo Funds
SoLo Funds is a peer-to-peer lending site where borrowers can ask SoLo’s community for loans of up to $200 without any interest rates or up-front fees.
The company is the brainchild of a team of founders led by Travis Holoway who, along with his founding team, discussed the idea of doing peer-to-peer loans back in 2015. They found that family members would ask to borrow money from them but there really wasn’t a good platform to lend and get repaid, especially for loans of $1,000 or less.
Payday and title loans were an option in these situations, his team discovered, but interest rates were high and lenders were predatory in most cases. Basically, consumers who were looking for these small loans had few options and the options they did have were expensive.
Because of this, he and his team felt like there was an opportunity to create a marketplace to serve these consumers.
“We wanted to have a wide-open marketplace where anyone could lend and borrow, where you have more access to capital that goes beyond your social circle, and it would help individual solve needs more quickly and avoid the alternative like payday lender,” he said.
So, in March 2017, Holoway left his job as a financial advisor at a well-known bank and devoted himself full-time to the company. He founded it the following month, then he and his team launched a beta version of the app and, in April 2018, SoLo did their full launch.
In this review, we’ll talk about how the SoLo Funds borrowing and lending platform works, what fees are involved and how what the company offers differs from competing sites who focus on community lending.
How SoLo Funds Works
Users can access SoLo from their Android or iPhone. The SoLo community is made up of all kinds of users who are there to borrow and to lend. User profiles aren’t designated by “borrower” or “lender” but by a SoLo score that rates the individual’s borrowing history on the site as well as their financial ability to pay back their loan.
If you need to borrow money, then you can post your need on the site. In addition to the dollar amount you need, you can explain why you need the money. You also have the option of leaving a tip for your potential lender.
According to Holoway, at the time of publishing about 85% of the site’s borrowers provided a tip for the lender.
Lenders can view the different loans which borrowers are asking for. Should they find one they want to fund, both the borrower and lender sign a digital promissory note, a document that says the borrower promises to pay the lender back. The money will be available to the borrower in 1-2 days, SoLo’s FAQ page says.
The borrower, Holoway said, tells the lender the date on which they’ll pay the loan back. That date has to be within 30 days of receiving the money.
In the meantime, SoLo has vetted the users on the sites according to bank-level standards for AML and KYC, which are acronyms that stand for “anti-money laundering” and “know your customer”, two standards meant to ensure that shady people aren’t using the lending platform to launder money and do other illegal things.
Paying Back the Money
Because the marketplace is very simple to use and lenders are sending money to borrowers they may or may not know, you might have worries about getting your money back.
As we mentioned earlier, there are a couple of ways you can reduce the risk of someone defaulting on their repayment.
First, you can check out the borrower’s SoLo Score. The company’s website describes the SoLo Score as a score they generate that predicts “a borrower’s ability to repay loans in a timely manner.” This is the basis by which they’ll approve the amount they'll let you borrow. Meanwhile, lenders can use this score to determine whether or not they want to lend to you.
Second, the promissory note that you and the borrower sign gives you the right to send the borrower’s account to collections. Doing so would put them in a tough position credit-wise – collections agencies report your delinquent account, which can drop your score significantly and hurt your chances of getting good rates on loans and credit cards.
However, you don’t have to go straight to reporting the borrower to collections. In the event that the borrower can’t repay the money by the due date, they can rollover their loan into an additional two-week repayment period.
The fee for a loan rollover is $5 or 5% of the loan amount, whichever is greater, and is paid to the lender, not SoLo. This is the only mandatory fee that SoLo requires. You can avoid the fee by repaying your loan on time. And, remember, you can only do one rollover.
After that, the lender can send your account to collections.
Here are a few other reminders:
- You can’t lend and borrow at the same time
- Loans are capped at $200
- You don’t have to leave a tip
SoLo Funds Fees
The only mandatory fee on the site is the $5 or 5% that you’ll pay to roll over a loan for a couple of weeks. That fee goes directly to the lender; SoLo doesn’t take a cut.
Leaving a tip for your lender is optional; you can literally borrow money for free if you want to.
Also, Holoway noted that you can donate to the site, too, if you'd like.
How SoLo Compares to Other Peer-to-Peer Lending Sites
There are all kinds of peer-to-peer lending sites out there. Some of them are huge and rely on investors’ money to fund debt consolidation loans, student loan refinancing, credit card debt consolidation and more. Some of the more popular sites in this space are SoFi and Prosper.
However, based on our research we believe that SoLo is far more community oriented and nuanced than those big sites because they’re making it possible for to find loans for less than $1,000, whereas a site like Prosper offers loans up to $35,000.
Also, SoLo doesn’t charge any fees unless you roll over your loan, whereas Prosper charges interest rates that go as high as 35.99%.
We see this site as competing with Yahoo Finance’s Tanda, a website based on community saving. Through Tanda, you join a group of at least three other people who want to save, say, $200. The group lasts for a set amount of time and is made up of different rounds of funding.
Each round, everyone pays, for example, $50. The first round, one person gets the $200. The second round, the next person gets $200 and so forth.
Yahoo charges the first person 8% of the savings amount and the second person a 7% fee. The person or people in the middle don’t pay a fee. The last person to get their money earns a 2% bonus. So, if you join a savings group with a $1,000 goal, the first person will pay an $80 and receive $920.
As you can see, the big difference between Tanda and SoLo Funds is that SoLo is far more streamlined. You don’t have to join a group; you get to pick the person to whom you loan your money. Also, SoLo doesn’t take any fees; the rollover fee goes to the lender.
Tanda is a good fit if you have the patience to wait until after the first two positions have paid out but it’s not a good option because it can take weeks to get your money if you wait until the middle or final positions.
SoLo is the better choice, in our opinion, if you need a small loan fast that you know you can pay back.
The Final Word: Pros and Cons of SoLo Funds
Based on our research of this service as well as our conversations with SoLo Funds CEO Travis Holoway, we believe this site’s greatest strength is that it provides a no-fee, no-interest platform for those who seek small loans and can pay them back within 30 days.
Even if you aren’t able to pay your loan back in 30 days and need a two-week extension, the fee you pay (5% or $5) is much fairer than what you’d get from a payday or title lender.
The downside to the service is that the lender has the power to send your account to collections if you don’t pay up after 30 days (no rollover) or 44 days (rollover). In our opinion, this is the site’s only downfall but it is a severe one. A collections account on your credit report can drop your credit scores significantly.
In conclusion, we believe this site is a great fit for someone who needs a small loan with no fees and the opportunity to tip your lender. We think SoLo is a refreshing financial service that breaks from the tradition of payday and title lenders who force you to pay high interest rates or put your car up for collateral to get the money you need.