Chime has launched Instant Loans, a micro-lending product offering up to $500 instantly with a fixed interest rate of 29.76%, without credit checks.
When members repay these loans on time, it can help boost their credit scores by 10 to 30 points, as Chime reports on-time payments to credit bureaus.
The Instant Loans product complements Chime’s existing suite of financial tools targeted toward middle-income users, including MyPay (paycheck advances) and SpotMe (fee-free overdrafts).
Neobank mega-competitor Chime announced that it has launched Instant Loans, a new product that allows users to access to up to $500 in funds instantly with a fixed interest rate.
The Instant Loans are three-month installment loans of up to $500 available to Chime members who receive direct deposits to their Chime Checking Account and are pre-approved, with no credit check required. To underwrite the loans, Chime uses its own technology combined with its own unique data sources.
Chime will notify members who are pre-approved within the Chime app and if a customer chooses to access the funds, they pay a fixed interest rate of $5 for every $100 borrowed and repay the funds in three monthly payments of $35 per $100 borrowed. This equates to an interest rate of 29.76%.
When consumers repay on time, they can potentially build up their credit, as Chime reports each on-time payment to credit reporting agencies. According to Chime, customers who pay on time may see their credit score increase by 10 to 30 points.
“We are relentlessly focused on helping everyday people achieve financial progress,” said Chime Chief Product Officer Madhu Muthukumar. “Our members have told us that they want simple and transparent tools to access money when they need it, and to help them build credit — and we’re excited Instant Loans provides both to our members.”
Chime was founded in 2012 and is well known in fintech for offering tools and services that cater to lower-to-middle income consumers. The challenger bank is best known for its earned wage access tool that allows users to receive their paycheck up to two days earlier when they set up direct deposit, but Chime also offers a credit-building tool and a feature that will spot users up to $200 to avoid account overdrafts.
Today’s launch of high interest micro-loans is a perfect fit for Chime, which aims to create transparency in lending with the fixed interest rate. The new Instant Loans product sits in Chime’s portfolio of other micro-loans, including MyPay, which is a paycheck advance product that allows members to access up to $500 of their check before payday with no interest; and SpotMe, which allows members to overdraft without fees.
Photo by engin akyurt on Unsplash
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