SAN FRANCISCO–A start-up that helps consumers to pay off high-interest credit cards is encountering some struggles as it seeks to get off the ground.
Called Tally, it works by having consumers scan a picture of their credit cards, with the consumer agreeing to a credit check. Tally then pays off the credit cards with a new line of credit at a lower rate.
But The New York Times reported that Tally is struggling as it seeks to launch at the same time that a similar lender, Lending Club, has run into problems with regulators and authorities, as CUToday.info reported here.
That issue aside, The New York Times asked, “Should consumers and others whom the company needs to succeed actually trust it?”
“Tally was born from a single question: If car loan rates for people with good credit are often below 5% and mortgage rates are below 4%, why do consumers generally pay 15% or 20% annually to borrow money from credit card issuers?”
The Times story explores that question with analysts, before exploring Tally’s background. The company was launched by people who had previously helped consumers borrow money for solar panel installations.
Tally makes its credit lines available to customers with at least a 660 FICO credit score, though you will need one that’s a lot higher to receive its best annual percentage rate, which is 7.9%. Most people will pay at least a bit more than that. For now, the highest rate is 19.9%, the Times reported.
Consumers who refinance with Tally make one payment each month, no matter how many cards it is handling on your behalf. That payment, depending on its size, covers all of the minimum payments on the cards, plus new charges and any lingering Tally debt, the Times said.
The New York Times reported that Tally reserves the right to suspend payments to card companies and withdraw a line of credit after two months of missed or returned payments.
Tally, in turns, bundles the loans it has made and other customers and investors as asset-backed securities.
Tally, which must make payments to a consumers’ credit card issuer, has automated the process but said it also has a manual payment plan in place if all else fails, so that late payments don’t become an issue.
Tally reported it has large financial commitments from both Silicon Valley Bank and a high net worth family that is an experienced purchaser of such securities.
For info: www.Meettally.com