The program links loans to future income

With all of that in mind, here’s a look at how some of these businesses work.

PAVE You have to be 18 to enroll, but the company said there was greater demand for people who were at least in their final year of college. Considering these demographics, almost half of people use the money raised to pay off their debts, while others use the money to pursue a big idea like making movies or furthering their education. Once the business has verified that the individuals are who they say they are and that they have passed their financial and credit checks, they can create a video campaign and online pitch.

Sal Lahoud, one of the co-founders of Pave, said he uses historical advice based on what an average person has earned in a particular field to estimate a candidate’s future earnings, which makes him helped determine how much he was likely to successfully raise. It is ultimately up to prospects to decide what percentage of their income they are willing to give up for the next 10 years, although that cannot exceed 10% of their annual income.

There is no cap on the amount returned to investors, but prospects can still choose to pay their backers five times the original amount, unless other conditions are set. “If you are doing amazing things, why shouldn’t the people who invested in you in the beginning participate? Asked Mr. Lahoud. “We have built a contract that balances both parties very well. Investors take full advantage of the downside and the upside. “

Borrowers pay nothing if annual income falls below 150% of the federal poverty line.

Pave also takes his share: 3% of the amount the individual collects, and he charges a 1.5% service fee on payments made to investors, who are expected to earn around 5-8% on their investment.

So far, over 4,000 prospects have applied to the program, with over 1,000 contributors. But the service opened to the public only six weeks ago. About 30 people have received all of their funding or are still fundraising, for a total of $ 550,000. Around 130 additional prospects have been invited to launch campaigns, which will be featured on the website over the next few months.

REACHED Although the company plans to open up the program to more people, it is currently only accessible to seniors and those who have graduated from a four-year college or graduate program in the United States. over the past eight years. You also need to be in fairly good credit shape, which means you need a FICO score of at least 640. (Having no credit history is acceptable).

The maximum that applicants can share is 7 percent of their projected annual income (over 10 years), which is calculated using its own model.

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