Inventing New Ways to Solve Old Problems

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Jeff Zhou

Co-founder and chief executive of Fig Loans

Many borrowers with poor credit scores face a problem if they run into a short-term cash crunch: They can’t qualify for an affordable small loan to tide them over. Jeff Zhou is offering an answer, in the form of Fig Loans. The lender’s goal is to offer an alternative to pricey payday loans that strapped consumers turn to when they have an unexpected financial emergency and have no other option. “We want to offer socially responsible financial products for people who are under banked,” he said.

Mr. Zhou, 29, said he wanted to give consumers with marred credit a chance to prove they are better than their credit score — in part because he was given a chance to excel. He attended Phillips Academy, a prestigious school in Andover, Mass., on a “near full” scholarship. “The school took a chance on me,” he said, “ and gave an ordinary kid the opportunity of a lifetime.”

Mr. Zhou and his co-founder, John Li, met when they were graduate business students at the Wharton School and decided that consumer-friendly small loans were a promising market.

But Mr. Zhou, who grew up in Buffalo, didn’t know anyone who had borrowed a payday loan. And he said Fig wanted to build a product that would serve consumers fairly. So in 2014, he and Mr. Li cold-called dozens of nonprofits seeking a partner that would help educate them. United Way of Greater Houston, which runs a financial coaching program in collaboration with community partners, saw an opportunity — and in 2015, Fig was off and running.

Fig’s target customers have checking accounts and earn $30,000 to $90,000 a year, but may have made a mistake that excluded them from the financial mainstream. Even though their finances may have stabilized, their history haunts them. Customers can apply online for a loan from Fig, which makes lending decisions based on bank statements, taking into account expenses like rent, utilities and spending, Mr. Zhou said.

Loans are $300 to $500 and, depending on the state, are repaid in four or six equal monthly installments — unlike payday loans, which typically must be repaid in two weeks, often setting up borrowers for failure. Fig’s interest rates sound high — annual percentage rates are as much as 190 percent and vary by state — yet are far lower than typical rates for payday loans, Mr. Zhou said. Repayment information is sent to credit bureaus, so borrowers can rebuild their credit.

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