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Product & Design

How Varo changed the way people see lines of credit

Discussion w/ Varo Bank's Sr. Director of Product, Sr. Product Designer, and Chief Lending Officer.

October 24, 2024 • Editors at Varo

Imagine a personal line of credit that wasn't only for the wealthy, but designed to support everyday people during times of fluctuating income or unforeseen expenses. At Varo, we set out to create just that. Today we sit down with three key team members— Jeff Dwight (Sr. Director of Product), Brian Renke (Senior Product Designer), and Raktim Mitra (Chief Lending Officer)— to unravel the intricate journey that led to the inception, development, and unveiling of our latest product offering, Varo Line of Credit (VLOC).

The problem we saw

Financial instability is a prevalent issue in the lives of many Americans today. Statistics from recent years reveal that 61% of Americans are ensnared in a cycle of living paycheck to paycheck, while a staggering 57% lack the financial cushion to cover unexpected expenses amounting to just $1,000.

Varo identified this pressing need for financial flexibility and security among individuals grappling with paycheck-to-paycheck dilemmas. To cater to these customers, we first introduced Varo Advance as a thoughtful solution. The product helped to bridge the gap by offering eligible customers up to $250— with the ability to grow their borrowing limit up to $500 over time— with 30 days to repay the cash advance. This innovative approach provides a cushion for income smoothing, empowering individuals to pay for daily expenses like groceries or fuel at the moment they need it most.

After seeing how customers benefited from Varo Advance, we recognized another critical issue in the financial landscape—a lack of reliable borrowing options to  cover emergency costs and higher-ticket expenses. Unexpected car repairs, essential home maintenance, or sudden medical bills often catch individuals off guard. To mitigate this, Varo decided to develop a solution— one that is now known as Varo Line of Credit


Our learnings from customers before creating VLOC

Understanding the evolving needs and preferences of our customers has always been a cornerstone of Varo's product development philosophy. One recurring theme that resounded loudly among our customers was the desire for more accessible credit options. When Varo responded to this feedback by increasing the limits on Varo Advance from $100 to $500, the overwhelming customer demand and positive feedback reinforced our belief in the necessity of expanding credit access. This success story laid the groundwork for the development of Varo Line of Credit (VLOC).

A pivotal learning experience was centered around determining the most customer-friendly approach to the product’s fee structure. While customers appreciated the simplicity of a fixed fee model for Varo Advance— as opposed to paying interest based on the balance of their loan— it was uncertain whether the fixed fee approach would be well-received for larger loan amounts as well.

To establish our initial fixed fee model, Varo conducted a test where customers were presented with two loan options of varying amounts—one with an APR and the other with a fixed fee, both outlining the cost of borrowing clearly. The customer response was enlightening: When viewing the cost of credit, respondents prefer to see a flat fee rather than an APR.

Customer sentiment revealed a dislike for APRs. This could be because customers associate APRs with a loss of control and the potential to spiral into uncontrollable debt. By contrast, fixed fees may give customers a sense of certainty, ensuring they know the exact amount to be repaid without the anxiety of fluctuating costs due to late payments.


What success looks like for VLOC

At Varo, the success of our line of credit product is anchored in our unwavering dedication to supporting our customers during pivotal life moments. The essence of success for VLOC encapsulates two fundamental aspects that resonate at the core of Varo's mission:

Empowering Financial Well-Being: Success, for us, means providing a financial cushion for our customers during life's unforeseen events in a way that is both manageable and sustainable. By offering access to credit that aligns with our customers' financial capacity, we aim to provide a healthy alternative to unmanageable debt obligations while facilitating a smoother journey through life's twists and turns.

Inclusive Access: Another pillar of success for VLOC revolves around providing access to lines of credit. Our goal is to make VLOC available to as broad a spectrum of customers as possible, especially those who were previously underserved or lacked access to a reliable and fixed price credit source. We hope that this product provides more people with financial flexibility and resilience.

The success of Varo's line of credit product is defined by the tangible impact it has on the financial well-being and empowerment of our customers. By staying true to our commitment to responsible lending practices and customer-centric values, Varo aspires to redefine success in the realm of financial services and foster a culture of financial health, accessibility, and empowerment for all.


Our approach & guiding principles for development

At Varo, the genesis of Varo Line of Credit was rooted in a steadfast commitment to crafting a financial solution that is not only intuitive and user-friendly, but also designed with the well-being of our customers at its core. Our approach to VLOC is underpinned by the following guiding principles:

Simplicity and Transparency

We envisioned a product that breaks away from the complexities and hidden charges prevalent in traditional financial services. VLOC was designed to be straightforward and easy to comprehend, with a single flat fee with each cash advance. With a fee structure that is transparent and explicit, Varo eliminates the need for customers to navigate through layers of fees or surcharges to understand the cost of borrowing.

Inclusive Access and Responsible Lending

Varo is committed to making VLOC accessible to a wide spectrum of customers, including underserved segments that often fall outside the purview of traditional lending institutions. By leveraging a comprehensive underwriting approach that embraces varied credit segments—particularly leaning into non-prime categories—we strive for VLOC to reach individuals who may have otherwise been overlooked. This inclusive ethos is made possible through a synergistic blend of credit bureau data and robust customer engagement insights from Varo's banking ecosystem.

Affordability and Credit Protection

It’s easy for individuals with financial setbacks to borrow money and then not be able to pay it back, leading to a damaged credit score. This can be exacerbated by the loan being high-interest. With VLOC, we wanted to provide a lifeline with fixed and affordable monthly payments so that our customers do not get caught up in compounding interest rates and debilitating debt. Instead, they will be able to budget smarter and reclaim control over their credit.


What makes VLOC better than other personal lines of credit?

Varo Line of Credit allows users to access funds ranging from $600 to $2,000, with repayment over 3 to 12 months (depending on the amount borrowed). It comes with a simple transparent fee and affordable monthly payments, helping our customers address unforeseen expenses without resorting to costly alternatives like high-interest credit cards or payday loans. Here’s more details about what makes VLOC stand out from other personal lines of credit.

Simple Upfront Fee Structure

Unlike lending products whose fees are strictly based on a recurring APR-based cost structure (which often have complex calculations and hidden costs), VLOC operates with a transparent and simple flat fee. This transparency ensures that customers understand the cost of accessing funds, thereby promoting financial literacy and informed decision-making.

Accessible to Marginalized Credit Customers

VLOC is designed to cater to credit-marginalized individuals who may face challenges in obtaining credit through traditional channels. By extending availability to a broader customer base, including many of those with limited credit history or lower credit scores, Varo empowers individuals who may have been underserved by mainstream financial institutions.

Affordability and Financial Health

One of the key attributes that distinguish VLOC is its commitment to affordability. By providing reasonable monthly payment plans and terms, Varo helps customers manage their finances effectively, reducing the chance of falling into high-cost debt traps. VLOC offers a more sustainable alternative to expensive credit card debt or predatory payday loans, safeguarding customers from excessive interest rates and punitive fees.

Financial Flexibility and Responsibility

VLOC not only offers financial flexibility when unexpected expenses arise, but also promotes responsible financial behavior. By mitigating the risk of accumulating additional interest or late payment fees, Varo empowers customers to navigate financial challenges without compromising their long-term financial well-being. This proactive approach to financial management sets VLOC apart as a conscientious and customer-centric credit solution.


VLOC lays the groundwork for future innovation at Varo

Our journey into creating Varo Line of Credit (VLOC) was a meticulous process that involved a series of strategic steps and collaborations across various departments. Through a multifaceted approach involving research, testing, collaborative efforts, and meticulous development cycles, Varo successfully crafted VLOC, a testament of our commitment to customer-centric design and operational excellence.

Varo Line of Credit is just one step toward continuous innovation, serving as a foundation for ongoing customer-centric enhancements. As the number of active VLOC customers grows, we gain valuable insights to optimize the underwriting processes. This optimization drives our ability to offer higher credit lines to more customers early on, amplifying financial capabilities and empowerment. Looking forward, Varo hopes to enhance VLOC with even more features that provide customers better financial flexibility in their lives.

Get started today or click to learn more about Varo Line of Credit.


The Varo Line of Credit is designed to help customers with unforeseen expenses with monthly payments, no late fee, no prepayment penalties, and no interest. Eligibility required. Once qualified for Varo Line of Credit, you will be assigned a credit limit from $600 to $2,000. A fee of $60 to $400 is added to your borrowed amount with each advance. Your credit limit may fluctuate based upon a variety of factors. You may only take one Varo Line of Credit out at a time. Your eligibility information and/or credit limit is always available to you in the home screen of your Varo app.

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