Worthy is a financial company offering access to fixed income investments through bonds that pay 7% interest. When you buy a Worthy bond, Worthy loans the money out to private real estate developers. The interest earned on the loans is paid back to bondholders in the form of daily compounding interest.
There are no fees to purchase Worthy Bonds, and you can cash out any time. If you're looking for a way to add real estate to an existing portfolio of stocks and ETFs, Worthy is an intriguing option. But like any investment, there are risks involved. We explore Worthy in more detail to help you determine if its the right choice for you.
Quick Summary
- For a limited time, purchase Worthy Bonds and earn 7.0% interest
- It's free, and you can cash out any time
- Your funds go to community real estate developers
Who Is Worthy?
Worthy allows you to invest your spare change in bonds that pay 7.0% interest. This fantastic rate is set to expire on January 1, 2026. You can purchase the bonds at worthybonds.com.
The company behind Worthy is Worthy Financial Inc. It was founded in February 2016 and is based in Boca Raton, FL.
The CEO of Worthy is Sally Outlaw. She was previously CEO of peerbackers.com, holds a real estate broker's license, a Series 65 license, and is a Registered Investment Advisor.
In July 2017, Worthy raised $600,000 in seed capital to fund its initial operations, including qualifying its bonds with the SEC. They launched their bond sales via their own proprietary technology platform in early 2018.To date, Worthy has generated over $240 million in bonds sales.
How Does It Work?
Worthy sells their $10, 7.0% interest-earning bonds to the public and then Worthy aggregates that bond sale capital and loans the money to real estate developers for their short-term, real estate projects.
These businesses pay Worthy interest on the loans and Worthy essentially shares part of this interest with you as a bondholder. The bonds are “demand” bonds which means they have no maturity date and can be held as long as you (the investor) wish.
To use Worthy, download the free iPhone or Android app and create an account. Bonds can be bought in three ways - whenever you wish with the click of a button, via a scheduled recurring investment feature, or though their spare change round-up program. For the round-up program, link your debit or credit card to your account and as you spend, the app will round up each purchase to the nearest dollar. This roundup is then invested in Worthy bonds. Interest begins accruing within a couple of days of your purchase.
As an example of how the round-up calculation works, if you buy a soft drink for $1.50, Worthy keeps track of the $0.50. A few days later, you go through the drive-thru at a fast food restaurant, paying $7.80. Worthy rounds up to the nearest whole dollar, which is a $0.20 difference. Worthy tracks the $0.20. Once you hit $10.00 in rounded-up spare change, a $10.00, 7.0% interest-earning bond will be added to your account.
You may be wondering how Worthy makes money if it doesn't charge any fees. While Worthy pays 7% interest to investors, it charges more than that on its loans to businesses and real estate developers. This spread is how Worthy makes money.
You can learn more about their current offering at worthypropertybonds.com. Note: Any U.S. resident, 18 years or older can invest, and the bonds are now available in all U.S. states.
When asked about she started the company, the CEO responded, "Well I'm trying to help people improve their financial health but to do it outside of Wall Street," Outlaw told Authority Magazine in an interview.
Outlaw continued, "With a focus on making money work for everyone (not just the 1%), I used recently updated securities laws in an innovative way. I took what is called Regulation A+, which is part of the new JOBS ACT [sic] law, and engineered a proprietary financial product for the masses.
It's a 7.0% fixed interest bond — that's only $10.00 — so it allows people to micro-invest and more easily build a nest egg. The bonds are also liquid meaning they can be cashed in at any time with no fees or penalties, so it’s a convenient way to invest."
What Are the Fees?
Worthy is completely free. There are no fees.
Worthy Customer Service
Worthy Financial has a TrustPilot score of 3.8/5, with 72% of reviews receiving 4 or 5 stars. This is based on 171 total reviews as of April 2024. If you have questions you can access dozens of articles in the FAQ section of Worthy's website.
If you require further support, you can contact Worthy via email at hello@worthybonds.com. The company also lists a phone number on its website (+1-833-967-8491), but the business hours aren't clear.
Is It Safe?
Bonds are fixed-income investments, so they tend to be less volatile than many equity investments, such as stocks, equity ETFs, and other alternative assets, such as crypto. But that doesn't mean they are low-risk.
Worthy Bonds are able to offer a higher-yield than government bonds because they lack the backing of the U.S. government, so investors are taking more risk.
Worthy has had some redemption pauses on their past bonds (but sold in a different offering based on business lending.) Some of those loans did default during the pandemic and Worthy investors didn't receive any interest payments. Worthy has said they are working to liquidate the inventory linked to those loans to repay investors.
It should be noted that Worthy no longer lends in the small business space in an effort to reduce risk. Its now focused solely in residential real estate, and directly holds the mortgages to the properties. Worthy uses independent property appraisals and lends at an average of 60% loan to value (LTV). While Worthy previously experienced some losses in the small business space, it has never lost a loan in 6 years of lending in the real estate sector.
According to Worthy, they can sell the real estate collateral to cover any possible loan defaults. But in the case of the business bonds, if the business has no inventory to sell, that may not work too well. As for investors, there's no information about what happens to their principal in the event of a loan default, but the bonds are not backed by only one loan, but by all the loans in the offering’s portfolio so that does spread the risk. The good news is Worthy has never had a loan loss in its real estate portfolio to date.
It should be noted that Worthy bonds are not FDIC-insured (insured by the Federal Deposit Insurance Corporation). The FDIC is only used to insure bank account deposits and Worthy is not a bank so its bonds carry no form of insurance.
Final Thoughts
Given that you can invest as little as $10.00, and it earns a solid 7.0% interest, Worthy bonds are interesting. However, there are definitely risks involved.
If you want to back community real estate projects, while earning a reasonable return, this can be a great way to do it. But you should limit your exposure to an amount of your portfolio that you are willing to lose if negative events happen in the economy.
Worthy Bonds Review
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Summary
Worthy is a platform that allows you to invest in loans to residential real estate developers. These loans will pay you, the investor, a 7.0% fixed return.
Pros
- 7.0% return is higher than many fixed-income investments
- You can start investing with as little as $10
- No fees or penalties
- Worthy bonds earn daily compounding interest
Cons
- More risky than government bonds
- Your investment is not FDIC-insured
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared toward anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications, including the New York Times, Wall Street Journal, Washington Post, ABC, NBC, Today, and more. He is also a regular contributor to Forbes.
Editor: Clint Proctor Reviewed by: Ashley Barnett