FinTech continues to grow in Canada – Borrowell profile

In other posts on my site, and I haven’t been shy about this, Canadians love debt.  Reports keep coming out that highlight credit-card debt, mortgages, consumer debt and non-mortgage loans are reaching an all-time high.  Simply put, most of us are spending more than we make.  However, if you’re going to borrow money, at least be smart about it.  That means consolidate debts where you can, pay off all high-interest debt first and avoid hidden fees and other schemes designed to keep you in the poor house.

Over the last couple of years, the financial technology (FinTech) industry has blossomed in Canada with new entrants, providing innovative, customer-focused solutions vowing to cut out the middlemen associated with traditional, brick-and-mortar loan provisions.  I profiled one FinTech company, Grouplend on my site last year.  Today’s post profiles another – Borrowell.  Here’s my interview with Chief Executive Officer from Borrowell, Andrew Graham.

Andrew, thanks for this, taking time out of your schedule to chat.   

Thank you. I’m always excited to talk about Borrowell and our mission to make lending in Canada fairer and friendlier.

Andrew, over the last year or so, I’ve seen more Fintech companies like Borrowell come online in Canada.  What’s leading this consumer lending change? 

Consumers haven’t been very well served over the past decades when it comes to personal lending. Bank loans are hard to get, often involving multiple trips to a branch. On the other hand it’s easy—perhaps too easy—to run up credit card debt, but that’s a very expensive way to borrow. Faced with this choice—inconvenient bank loans or expensive credit card debt—it’s no wonder that alternatives like Borrowell are flourishing.

We know that technology has transformed industries like transport and television. Many of us appreciate having new options like Uber and Netflix. Now, technology is transforming personal finance. Take our business as an example. Using technology, we eliminate the need for someone to come to a branch to check their rate on a loan with us, and we can offer much lower rates than credit card. So the trade-off between affordability and convenience goes away—you can have both!

Let’s talk about Borrowell – what is it?  What services do you provide?  Who are your typical clients?

Borrowell offers loans to Canadian consumers through our website. We make the process fast, fair and friendly, offering an instant answer with no trips to a branch. Our personal loans range from $1,000 to $35,000 for three or five year terms, with rates starting at 5.6% APR. We offer a fully online process from start to finish. You can check your rate on Borrowell.com to see if you qualify for a loan without it affecting your credit score.

Since Borrowell launched just over a year ago, we’ve processed over $550 million in loan applications. It’s a really positive response that shows Canadians are embracing the benefits of our service.

We see customers choosing to borrow with Borrowell from all across Canada. Our typical customer has some credit card debt that they want to refinance, though we also see people take loans with us to avoid taking on credit card debt in the first place.

We do have a few minimum criteria in order to qualify for a loan. For example, you need to be a Canadian citizen or permanent resident, have good credit with a good repayment history, and have at least 12 months’ credit history. We offer loans to residents of all provinces except Quebec and Saskatchewan.

Now, why Borrowell?  What makes you different from other lenders?

Because we combine technology with great customer service. Our technology allows us to offer rates tailored to each applicant. Our whole process can be done online, and you get an answer instantly, with funds within 2 days. But we understand that these are important financial decisions for our customers, so we have a customer service team on hand that I’m very proud of. We’ve had lots of great feedback from our customers.

Our team also has a wealth of experience in the Canadian financial services sector. We’re an innovative company, but with a lot of experience on which to build that innovation. I worked at PC Financial along with our Chief Risk Officer, and our Head of Capital Markets, Norm Cappell, comes from Bay Street where he worked at RBC.  We also have an impressive group of investors that bring a lot to our business. We recently announced that David Chilton, best-selling author of The Wealthy Barber and former Dragon’s Den dragon, has joined Borrowell as an investor and advisor. We’re proud to have Equitable Bank and Power Financial as investors. Equitable is Canada’s 9^th largest Schedule I bank. Power Financial’s companies include Great-West Life and Investors Group.

I’ve written about my distaste for debt on my site.  There is a mental side.  We’re trying to get out of debt to free up our financial life.  I suggest readers of my site consider the same.  What’s your take on debt, including “the good debt” versus “bad debt” argument?

I think borrowing can be a good financial decision in certain situations. Buying a home would be impossible for most of us without a mortgage. Similarly, getting a student loan to earn a degree can be a good decision. And of course paying off credit cards or other high-cost loans with a lower rate loan is a smart move. In all cases, debt has to be affordable and fairly priced—and there needs to be a clear path to paying it off. Borrowing to fund day-to-day purchases is dangerous, and there are too many predatory, high-cost loans out there that don’t make sense for anyone.

At Borrowell we believe in responsible lending to responsible Canadians. We know that there are many people with great credit who, for want of better options, end up carrying high cost debt. Our business model is simple: use technology to make it radically easier to find out your borrowing options, and offer a clear path to paying of debt. If you borrowed $4,000 on a credit card with an APR of 19.9% and made monthly payments of $100, by the time you pay off the whole amount you will have paid interest of $2,619. In contrast, on a $4,000 Borrowell loan with an 11.7% APR and payments of $132.61, a borrower would pay $693 in interest. That’s almost $2,000 in savings and paying off your loan 31 months sooner. We actually have a great credit card savings calculator that people can use to see how much they would save.

Care to share what debt you’re willing to take on Andrew?  Any debt lessons learned you’d like to share?

My wife and I recently had our second child and decided that it was time to move from a condo to a house—which is a major purchase anywhere, and especially here in Toronto! So, with our mortgage, we now have more debt than we’ve ever had in our lives. The good news is that it’s all at low rates of interest and the payments are affordable for our budget. We avoid high-cost debt, like credit card debt. I think that would be the best debt lesson I’ve learned: if you’re carrying debt, make sure the rate is as low as possible and that the payments fit within your budget.

Recently we also went through the exercise of getting life insurance. Since we depend on both of our incomes to pay down our debts, we wanted to be sure that everything could be paid for in the horrible event that something happened to one or both of us. Not a very happy thought but, we felt, important to plan for.

Back to Borrowell, what is the fee structure for personal loans?

We think it’s crazy that credit cards generally charge everyone similar interest rates. We all pay different rates for car insurance—why should everyone pay 19.9% interest (or higher) on credit cards?

When someone applies to Borrowell, our technology examines their credit history and financial situation to determine an individualized rate and loan amount. We think this is a much fairer way to lend money.

Similarly, we don’t have any hidden fees. We’re transparent about the cost of borrowing, which includes the interest rate and one-time origination fee that gets added to the loan. As with any loan, the key number to focus on is the annual percentage rate (APR), which takes into account the fee and interest rate. We highlight it prominently when we present loan offers.

How can folks pay back the loan, and quickly?

You can repay your Borrowell loan at any time without any fees or penalties. A borrower can repay part of her loan to shorten the term of the loan, or she can repay the entire balance in one go. The process is quick and easy. We feel this gives our borrowers extra flexibility and more options to proactively manage their finances.

What future plans do you have for Borrowell?  Any last words to share with readers Andrew?

We’re focused on reaching as many Canadians as possible with our message that, if you have credit card debt or other high cost loans, come visit us and check your rate. It only takes a minute and is completely free.

Looking towards the future, we see many other ways to improve consumer finance and help people make smarter borrowing decisions. We’ve got some exciting projects on the go and I’ll have more to share in the months ahead, I’m sure!

Thanks for the chat Andrew.   Readers, what’s your take on Borrowell and the changing FinTech landscape?   What other FinTech products or services would you like to see?