What Is Fig Banking and How Does It Work?

Fig is a financial technology company offering specific financial solutions to consumers. It operates as an alternative to traditional banking services, providing financial tools designed to address immediate cash needs and help individuals build a positive credit history. Fig aims to provide a more affordable and flexible option compared to higher-cost lending choices available in the market.

Fig’s Financial Products

Fig offers two primary financial products: small-dollar installment loans and credit builder loans. Installment loans provide quick access to funds for unexpected expenses, typically ranging from $50 to $1,000, with repayment terms usually between one to six months. These loans have fixed repayment schedules, offering predictability for borrowers. While carrying higher Annual Percentage Rates (APRs), generally between 175% and 211%, they are presented as a more affordable alternative to traditional payday loans.

The credit builder loan helps individuals establish or improve their credit scores. Fig places the loan amount into an escrow account, rather than disbursing it directly to the borrower upfront. Borrowers make regular monthly payments over a set period, often 12 months. These on-time payments are reported to all three major credit bureaus: TransUnion, Equifax, and Experian. Upon successful completion of the repayment term, funds held in escrow, minus any interest and fees, are released to the borrower, effectively creating a savings mechanism while building credit.

How Fig’s Services Operate

Accessing Fig’s services begins with an online application, typically taking a few minutes. Applicants need to reside in one of the states where Fig operates, such as Florida, Illinois, Missouri, Ohio, Texas, Utah, and Wisconsin. Eligibility requires a verifiable source of steady income, a bank account with at least three months of transaction history, and direct deposit of paychecks. No hard credit check is performed during the application, making it accessible for individuals with limited or no credit history.

Once approved, funds for installment loans can be disbursed rapidly, sometimes instantly to a debit card or within one to three business days via ACH transfer. Repayment involves fixed monthly payments, typically deducted automatically from the borrower’s bank account on agreed-upon dates. Fig also offers flexible payment options, allowing borrowers to reschedule payments up to 28 days or even split a payment in half without incurring additional fees. This flexibility helps borrowers manage their obligations during unforeseen financial challenges.

Who Fig Serves

Fig primarily serves individuals who may have difficulty accessing financial products from traditional banks due to a limited or non-existent credit history. This includes working-class Americans seeking alternatives to high-cost short-term loans like payday loans. The company focuses on providing financial solutions for those needing quick access to emergency funds for various personal expenses, such as car repairs, medical bills, or living costs.

The company’s approach is inclusive, offering an avenue for individuals to build or repair their credit profiles through consistent, on-time payments. By reporting payment history to major credit bureaus, Fig helps customers establish a positive repayment record, which can improve their credit scores over time. This focus on credit building distinguishes its services from other short-term lenders that may not report payment activity. Fig aims to bridge the gap for those in need of immediate financial assistance while fostering long-term financial health.

Fig’s Operational Structure

Fig operates as a financial technology (fintech) company, not as a chartered bank. This distinction means it does not engage in traditional banking activities such as deposit-taking or offering checking accounts. Instead, Fig functions as a direct lender in the states where it holds the necessary state lending licenses. Its operational model leverages technology to streamline the loan application and management process, allowing for online access and efficient service delivery.

The company often collaborates with non-profit organizations to expand its reach and ensure its products align with community needs. While not subject to the same federal oversight as chartered banks, Fig operates under consumer protection laws applicable to lenders and and is regulated at the state level. This regulatory framework requires adherence to various state-specific lending regulations, including those governing interest rates and fees. Fig’s business model is built on providing accessible credit while maintaining transparency regarding its terms and conditions.