A data-centric financial tech company is now trying predictive analytics in a new realm: “near-prime” lending for customers with credit records that are not quite good enough for conventional bank loans.
ZestFinance’s new Basix product offers three-year loans of $3,000-$5,000 to customers in five states. Basix loans have high fixed annual percentage rates that range from 26% to 36%, and are intended for customers who have difficulty securing loans through traditional means due to bad credit.
ZestFinance applies machine learning techniques to a wide variety of data sources, allowing the company to predict how likely an individual is to repay a loan; the company also offers the technology to other lenders as an additional product.
“Basix will serve regular, hard-working people whose credit scores are just below levels that would allow them to qualify for a bank loan—tens of millions of Americans,” CEO Douglas Merrill said in a statement. “Our customers are middle-class Americans who have insufficient credit histories or have weathered a financially draining life event and are building or rebuilding their credit.”