Managing personal finances can be challenging, and most of us shy away from talking about it. It is encouraged to audit our expenses frequently though many fail to do so as they want to escape the reality of their financial situation. Coupled with access to easy credit, more people are falling into the credit trap. Once you get into the credit pit, coming out of it proves difficult and you find yourself taking loans to repay a previous debt thus, the cycle continues.
In the recent past, India’s household debt has been on the rise, rapidly accelerating to 37.3% of the GDP in 2021. This means that the household debt is about USD 1 trillion, calculated at the current GDP of $2.62 trillion. According to research, the growth in India’s retail borrowing has been driven by the consumption needs of Gen Z and early millennials. These retail loans have high-interest rates aggravating the loan repayment capabilities of individuals availing of such loans. These loans are prone to defaults and could easily surpass a default rate of over 15% as the gross NPA ratio of Indian banks surpasses 10% in the coming few months.
All of this has led to our present scenario of India lacking as a nation with credit education. There is an increase in consumption fueled by growth in eCommerce, and an oversupply of credit through newer means like BNPL, etc. This means that Indian consumers are getting entrapped in the vicious cycle of debt and keep repeating the same mistakes.
With a vision to help debt-burdened consumers get debt-free and regain their financial freedom, FREED was founded in August 2020 by Ritesh Srivastava, a serial entrepreneur, and alumnus of NIT Bhopal. Ritesh has over 20 years of entrepreneurial experience in Financial Services, Tech, and eCommerce businesses in the US and India. FREED was an apt name since it denotes Freedom, liberation from debt, and a Debt-Free life.
Emergence And Impact Of Freed
The growth in retail lending and the over-abundance of credit have made many people take unnecessary financial steps. The immediate impact of COVID-19 was job losses, pay cuts, and business closures that impacted the loan repayment capacity of many borrowers, pushing them into defaulting on the loans.
The FREED team has successfully operated Debt Relief businesses in the US and has settled over $2 billion in consumer debt in the US. The launch of FREED in India wasn’t an overnight decision. It was done after extensive study with different stakeholders, I.e., borrowers, lenders, lawyers, consumer advocates, and financial consultants. The team spent 3 to 4 months going over the market scenario before being convinced about the huge demand for debt relief in India.
The most exciting part of the journey has been about creating a new category/vertical in India. The challenge has been in bringing awareness to the debt relief concept by working with different stakeholders. Founded in the middle of the first lockdown during the COVID-19 Pandemic, and having had to endure a second round of lockdown, some challenges were met head-on and overcome. In a new business, adapting to the work from home concept was challenging. Therefore, the journey so far has been enriching, rewarding, and fulfilling.
Freed Creating Debt-Free Citizens For The Future Of India
FREED is solving a massive problem of growing debt and defaults. FREED’s customers are Gen Z and early millennials who are entrapped in debt. Collection calls from different creditors and their associates can take a toll on mental health and cause immense stress and embarrassment. Many debtors who are unable to fulfil their creditors are harassed unceasingly, some even resorting to an unlawful collection process.
The debt relief program and the array of debt relief products/services under the banner will help customers eliminate their debt and instil financial discipline in them so they can become future responsible borrowers. Furthermore, once you are enrolled in the program, you stay protected through CHPP, Creditor Harassment Protection Program. This program is aimed at providing pre-litigation assistance to all the customers under FREED.
Once you enrol with FREED, you have an honest assessment of your financial woes and a personalized plan for repayment.
Understanding The Service Offered By Freed
“At FREED, our guiding principles and values are – Empathy, Passion, and Service. They’re what make us FREED, and these values should reflect in everything we do. We are in a business of transformation, and the end goal is Financial Freedom and Liberation from Debt, for our customers.” Ritesh Srivastava, Founder, FREED
A person seeking debt resolution approaches FREED for help and the brand acts as a neutral party that resolves the issue between borrowers and lenders amicably. For this service, FREED charges the borrowers a flat fee for the total amount of debt once they enrol in the debt relief program. The good news is, that the fee is charged to the borrower only after the debt is settled. What kind of debt can you as a debtor enrol in the program?
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Most unsecured debts (without collateral) can be enrolled in the program. If you have a debt load comprising credit card debts, consumer loans, personal loans, payday loans, peer-to-peer loans, and education loans; the result once you enrol in this program will be beneficial for you.
FREED is aiming to create an ecosystem to bring together consumers seeking debt relief and lenders for a mutual win-win. We are working closely with the retail lenders (Banks and NBFCs) so they can leverage our platform to salvage their bad loans that they would have otherwise written off.
The goal of FREED is to help you become debt-free by negotiating with your creditors instead you and getting them to accept significantly less than face value on your unsecured debts. A debtor typically saves 40-55% on his outstanding debt after paying FREED’s service fee.
A debt relief program might negatively impact your credit score in the short term, but in the long run, it will start to improve gradually and you will slowly work towards being debt-free.
This Is What The Market Insight Looks Like
The anticipated total retail loan book of unsecured loans (Personal loans and Credit Cards) is roughly $130-140 billion. Given the current economic situation and the looming recession, it is expected that the NPAs in unsecured loans will reach about 15%, which pegs the total addressable market at $20 billion.
FREED is working on exciting products/services that would address the problem of debt at an early stage of prevention as well. These product rollouts would be a game-changer for the debt relief industry. The immediate aim is to enrol 100,000 customers on FREED’s platform over the next 24 months with an AUM of $500 million.
Using Funding To Create Better Avenues To Clear Debt
Most recently, FREED has closed a pre-series A funding of $2.8 million from Inflection Point Venture, Multiply Ventures, and a few other leading Angel platforms and HNIs. This fund will be utilized to strengthen teams across verticals, build the tech stack to roll out new and differentiated debt relief products and services, and brand promotion.
The next product to be rolled out is personalized budgeting, spend analytics, repayment simulations using AI/ML and real-time flow-based data for debt payoff strategies, and credit education. They’re also building a proprietary credit score algorithm for near-prime borrowers to regain their creditworthiness. They are also in discussions with a few lender partners to offer customized debt consolidation loan products to select customers who are overleveraged and are seeking relief.
The revenue model is simple, they charge a flat fee on the overall debt enrolled by the debtor on FREED platform. Using this model, they’ve grown 400% year on year in revenues and are clocking a 15% growth month-on-month in terms of the debt enrolled on the platform. FREED has enrolled over 6,500 customers with 370 Crore in retail debt since its launch in August 2020.
How Freed Plans To Grow
The immediate aim is to enrol 100,000 customers on the platform over the next 24 months with an AUM of $500 million. FREED was founded with a vision to help debt-burdened consumers get debt-free and achieve financial freedom. And through the debt relief products/services, they are aiming to address this problem across the spectrum.
Technology is key to evaluating profiles of debtors in the quest to make a personalized debt relief program to ensure a debt-free customer. They plan to roll out FREED Super App for debt relief in the next 2-3 months and have recently opened a development office in Bengaluru and working on rolling out additional debt relief products/services to address the problem of personal debt across the spectrum. At the core of FREED’s debt relief solution is KOSH, a data analytics hub that harnesses flow-based transactional data related to the behavioural spending of consumers.
They are collaborating with large DSAs (loan originators/aggregators) to scale the business for their debt relief service. To push the business further and lead the technology, strategy, and growth, a seasoned team of professionals has joined FREED’s management team.