Frequently Asked Questions
Frequently Asked Questions
How does the Defynance ISA work?
An Income Share Agreement (ISA) is an innovative funding method where a person contractually agrees to share a percent of their income with an ISA investor for a set payment term in exchange for an amount of financing up front. For example, a person may agree to share 4% of their income for 10 years in exchange for $15,000 financing. As a funding model, ISAs are a more fair alternative to loans.
An Income Share Agreement (ISA) is an innovative funding method where a person contractually agrees to share a percent of their income with an ISA investor for a set payment term in exchange for an amount of financing up front. For example, a person may agree to share 4% of their income for 10 years in exchange for $15,000 financing. As a funding model, ISAs are a more fair alternative to loans.
An ISA could be a useful financing method for anyone as a socially responsible alternative to loans. If you are looking for a better financing method with built-in downside protections, an ISA is right for you. If you are not a fan of compounding interest that adds to your hardship or debt producing loans then an ISA is an ideal solution. Most importantly, an ISA is a balanced financing method that protects you and rewards the investor for empowering you to realize your potential without the potentially crippling burden of debt.
We do not have a minimum required credit score to apply for our ISA refinancing program. While credit score is a factor, we use forward looking indicators that predict future earning potential, instead of just backward looking indicators such as a credit score.
Yes, there is a prepayment option with an ISA. Someone can either prepay whenever they are able to or if their income substantially increases, the ISA may end early if the payment cap is reached prior to the payment term expiring. This makes ISAs an excellent option even for those who expect their income to rise faster than originally expected.
An ISA is a socially responsible financing method so, by default, the income share percent has to be affordable. We use a proprietary algorithm to predict the optimal income share percent that is customized for you based on the amount of financing you need, your income, and other relevant data inputs. The payment term can increase or lower your ISA percent and we aim to provide you with a quote that has multiple income share percent and payment term options that you can choose from. Finally, the income share percent and payment term have caps so you are always presented with fair and reasonable ISA terms.
Our Pricing and Risk Algorithm for Income Sharing (PRAIS) is how we determine your human potential. We use over a hundred data points to offer you different options for income share percentage and ISA term length. Our goal is to eliminate your student debt, offer affordable payments, and give you the freedom to live life on your terms.
Not a Loan, an Income Share Agreement (ISA)
An ISA is different from a loan because it is not a loan. The amount financed through an ISA is not required to be paid back. An ISA stipulates that a set percent of income is shared with an ISA investor during an agreed payment term. The obligation to share income ends once the payment term expires irrespective if the total payments made are equal to, less than, or more than the amount originally financed.
There is no interest because an ISA is not a loan. There is never the burden of debt with an ISA. Since only income is shared with an ISA investor, the obligation to make payments pauses when income falls below $2,000 a month. During this deferment period, there is no compounding interest so it is possible, but not expected, that total payments may be less than the original amount financed. This means that ISAs never make the situation worse when someone faces financial hardship making them a socially responsible alternative to loans.
To qualify, you must be a United States citizen or permanent resident, have a degree or professional certification from an accredited institution, and currently hold a job.
In the event of a job loss, ISA payments pause until income resumes again. The payment term may be extended (up to a maximum number of months) by the length of the deferment period. Payments may also pause (deferment) if income falls below a hardship threshold.
An ISA is a legal contract that has protections built in if income is lost or falls $2,000 a month due to no fault of your own. However, if you run into a situation where you may need to stop working for an extended period of time, you are obligated to contact us so that we can determine the best course of action together. In some situations, you will be granted a deferment term or may even be able to assign your ISA obligation to another household member or guarantor. As long as you are not misrepresenting your situation or choosing not to work without a legitimate reason, we should be able to work out a mutually acceptable solution.
This is what makes an ISA socially responsible because both parties in the transaction have aligned goals. The ISA investor succeeds when you do.
An ISA frees you to pursue your potential and your passion. If this means a career change or business is in order, you should contact us so that we can get you the proper advice and mentoring from our ISA eco-system of resources. During this transition phase, your ISA payment will adjust with your income.
The Defynance ISA product is completely income based and is not a loan so there is no debt or interest associated with it. Income-Driven Repayment (IDR) plans always make you pay off your loan principal, plus the interest that has accumulated. If your debt is forgiven, it can take up to 20 years of paying 10%-20% of your income. With Defynance’s Income Share Agreement (ISA), you will never have to pay interest because you will never be in debt. With Defynance your payment term will never be 20 years and your income share percentage will never exceed 15% and will be lower in many cases.
The risk associated with an ISA is that you could end up paying more than you would with a loan, but only if you have a significant increase in income. Even in this scenario, your payments are capped and you always have an option to prepay and terminate the ISA.
Yes, Defynance works with credit reporting agencies to get a credit report and to report ISA performance to the credit bureaus. As part of your application process, and potentially at other times, we will pull your credit report from the major reporting agencies with your authorization. We will also report your performance under this ISA (both positive and negative) to the credit reporting agencies. You are entitled to know your rights regarding credit and how it is used. Please visit the following link for more information: www.consumerfinance.com/learnmore
