Many people, for instance after going through a divorce or getting laid of their job are falling behind on some bills. Those people see their credit score slipping and know they would never be able to do the things they want – buying a new car, moving to another house – if they are not improving it by paying off their bills. To do that, they need money, but of course, with a low credit score, borrowing from a bank is difficult.
Vouch wants to help those disadvantaged Americans build better credit by asking their friends and family for loans. This company believes trust is more important than computer-generated formulas, so they consider your network of friends and family when determining your loan. They can lend to you at a lower rate as you grow your personal Vouch network. The more people vouch to you, the more your network can help you get a better loan. The money comes from Vouch, but the faith and credit really comes from your friends.
How does it work?
- Join Vouch – When you join Vouch, they need just enough information about you to understand your starting point from a credit perspective. This won’t affect your credit score.
- Build your network – To get a loan offer from Vouch, you will need two people to Vouch for you. The people you invite to vouch receive an email that includes your name, but no other personal information. People vouch for you by choosing an amount of money and agreeing to pay their vouch amount if you do not pay Vouch back. They only pay Vouch if you do not.
- Get a better loan – A strong network of people vouching for you can help you get a larger loan, lower your interest rate or both. With Vouch people help each other increase their creditworthiness.
Interest rates for Vouch loans can be as low as 5%, but as high as 30%. The interest rates can be high, but when people improve their network, the rate will be lower. When more friends and family Vouch for you, they help you increasing your creditworthiness, and thus help you getting a lower interest rate.
Will the Vouch concept be the future?
The founder and CEO Yee Lee says, “If there are tens of millions of Americans who are credit underserved, then there is no reason that the Vouch network of the future couldn’t be millions of members strong. The bigger the network, the stronger the proof of concept.”
In my opinion the concept of Vouch could be the future. Although I am considering if people who are in need of money, are willing to ask their friends and family to Vouch for them.