RedCarpet, a micro-lending startup for student which provides loans without credit card and bank account details, has today announced that it has secured $2.5 million in seed funding round from Lightspeed Venture Partners.
The funds, raised in the current round, will be used to improve the technology behind risk evaluation, introduce new student-lending features, hire data scientists and deepen market penetration.
The company began its operations in November 2015, and was a part of Y Combinator’s Summer 2015 batch. It arranges loans of up to ₹60,000 per user, with the average loan size being around ₹5000-8000. However, interest-free rates are offered to individuals repaying the loan within a month.
An employee of the company said to Economic Times:
At one point, the team was contemplating alternative forms of lending that are less risky , but for now they have decided to stick to student microlending since the market potential is huge and a winner is yet to emerge.
The default rate for students tends to be easily over 1%, and the idea is to bring down that default rate and introduce incentives for students to save and pay, emphasising the importance of a good credit score.
Once a user installs the RedCarpet app, he/she is asked to upload verification documents to get the credit limit. After that, for placing order, just chat with a representative using the app and confirm the contract using your phone. Once the order is placed, you can pay monthly using cash or online banking.
It is said that the company is receiving up to 500 applications a day, with 80% of those being rejected. It has already tied up with microfinance institutions and has partnered with select non-banking financial companies for loan disbursal.
According to RedCarpet, the Indian market for loans to college students to buy consumer products is estimated at about $8 billion, which is approximately Rs 53,750 crore.
