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That’s because it comes with a catch, where you could lose your car if you miss a credit card payment.
Billing itself as the first-ever vehicle-secured credit card, Yendo is an alternative to payday loans, offering monetary advances to people who normally wouldn’t qualify.
In exchange for the credit card, Yendo puts a lien on your vehicle.
Under “If I miss a payment, will I lose my car?” on the company website’s FAQ section, Yendo explains “as a lienholder, we can exercise our right to recover an outstanding balance, but this is our last option.”
Customers have 25 days after their monthly statement to make a minimum payment of either 1% of their debt or $50, whichever is greater, the company’s website says.
Bad bet or better option?
Yendo’s CEO and co-founder, Jordan Miller, told Fortune that he’s offering Americans with bad credit a better option than the predatory loan alternatives.
For example, car title loans, where drivers borrow money using their car as collateral, can charge as much as a 300% annual percentage rate (APR), according to the Federal Trade Commission.
That’s more than ten times the average interest charged for loans or credit cards, the Federal Reserve’s lates figure shows.
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A more popular loan type for poor-credit borrowers is a payday loan, which offers cash advances based on your paycheck.
More than 12 million Americans take out payday loans every year, according to the Consumer Financial Protection Bureau, and they pay close to 400% APR.
Car title loans and payday lending should be stamped out by Yendo’s less predatory model, Miller argued to Fortune.
“The size of the U.S. population that is credit-strapped is so much bigger than people realize. It is mind-blowing,” says Miller.
“We’re trying to solve this.”
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A better last resort is not a good first choice
Putting a lien on your car could put your livelihood or well-being at risk, so take your time to consider doing so.
Calculate how much you need to borrow and if you could make the monthly credit card payments, because failure to do so could cost you your vehicle.
Yendo offers people in hard financial situations a less onerous way of accessing credit, but that doesn’t mean it’s your only option.
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Improving your credit will help you qualify for a credit card, loan or other financial tools that don’t involve putting personal possessions on the line.
How to fix your credit score fast
Improving your credit score quickly starts with taking the time to examine your credit history.
You can get a free credit score, free credit report card, credit trackers and advanced reporting on your credit history from a number of online services.
Next, track down outdated or incorrect billing information on your credit history.
You could have been charged for things you didn’t buy or you could be listed as owing on a debt you already paid.
If there are major issues with your credit report, some law firms can track down documentation to dispute the charges.
There’s also something called a secure credit card, where you give the bank an amount, say $500, as collateral and they allow you to use the card to help rebuild your credit score.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
A guide to credit scores
Some people may not know what their credit score is, or if they have good credit.
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First, you can check your credit score for free.
This is what your credit score means:
- 300-640: Low
- 640-680: Medium-low
- 680-720: Medium-high
- 720-850: High
One way to minimize negative impacts on your credit score is to carry less debt than you have available.
So, if you have a $10,000 limit and you owe $3,000, that means you’re carrying 30% of your credit limit as debt.
But if you have a $12,000 limit and you’re carrying $3,000 worth of debt, you’re only carrying 25% of your limit as debt.
In the second scenario, your credit will be less negatively impacted.
Tracking your credit history and making a budget to stay on track financially can help you qualify for the money you need without sacrificing your hard-earned possessions.
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William Koblensky Varela is a Staff Reporter at Wise who has worked as a journalist for seven years covering finance, local news, politics, legal issues and the environment.
