per year, Garvey says. “There are a lot of people that are either new to credit or are rebuilding credit,” he says, adding that some of his customers are immigrants.
Users must be 18, a permanent U.S. resident, and have a bank account. Garvey says, as of this month, Self Lender has about 24,000 customers with $20 million in deposits in 47 states. (Self Lender does not operate in New York, Wisconsin, and Vermont. Garvey says Self Lender is working through those state’s regulations and plans to be available in those locations in November.)
Stephen Hays, managing partner with Deep Space Ventures in Dallas, says Self Lender is the firm’s first fintech investment. In addition to the startup’s market potential, he says he also believes that its software can help people—a dual mission he found attractive.
“When I looked at the profile of the typical person who does not have a credit score, I saw immigrants coming to this country for a new life, young people just beginning their adult lives, as well as soldiers and sailors who have yet to establish credit,” he says.
If a user stops making payments, Garvey says late fees of between $3 and $7 a month are imposed and credit bureaus are notified. At the end, the CD is liquidated to cover the loan and the user is sent a check with the remaining amount, minus late fees. While Garvey says he hopes people can use Self Lender to better their credit, failing to make payments would have the opposite effect.
Garvey says Self Lender will use the funding to make key hires and for sales and marketing.
The Techstars Austin alum is part of a subset of fintech startups that aim to help consumers improve their financial profile, rather than, say, selling banks technology tools that help them find and keep customers.
Another in this consumer fintech category is Cinch, a Boston-based startup that aims to be a digital CFO for consumers. As my colleague Jeff Engel reported, Cinch’s software uses artificial intelligence techniques to continually assess a user’s finances and recommend actions, such as moving money into a savings account, prioritizing certain debt payments, or switching to a cheaper auto insurance policy.
Still, even as more fintech tools emerge for consumers, Garvey says his business wasn’t an easy sell to potential bank partners. Self Lender met with 60 banks, he says, before Austin Capital Bank agreed to partner with the startup. That’s mainly why why Self Lender is based in Austin, he says.
Garvey says banks like Austin Capital see a business opportunity in what Self Lender is doing. After all, if people rehabilitate their credit scores, they can qualify for credit cards and other financial products.
As it turns out, Garvey says he’s noticed that a group of Self Lender’s customers looks familiar. “We have quite a few CEOs of startups that are using our product,” he adds. “Entrepreneurs are used to taking risks, and many times, people end up hurting their credit score because of this.”
