P2P – Page 2 – Digital Finance Analytics (DFA) Blog

NAB Announces Collaboration With Global Equity Crowdfunding Platform

NAB has announced an innovative collaboration with Israeli company OurCrowd, a leading global equity crowdfunding platform that will provide NAB clients with direct access to exclusive OurCrowd start-up investments together with domestic and global networks and events.

The first of its kind in Australia, the collaboration provides direct access for NAB clients to one of the world’s largest equity crowdfunding platforms, which raised more than A$600m from approximately 20,000 investors across 112 countries for over 120 early stage companies.

The announcement was made by OurCrowd CEO Jon Medved at the Australia-Israel Chamber of Commerce Women Leaders Delegation in Israel.

NAB Private Executive General Manager Christine Yates, one of the delegates, welcomed the collaboration and said it was another example of NAB deepening its relationship with its clients and offering innovative solutions for a changing environment.

“We know that our clients are looking globally for investment opportunities, and OurCrowd is an established global platform which offers a full service end-to-end solution,” Ms Yates said.

“Technology is changing the way we do business and this shows how NAB is thinking differently when it comes to servicing our clients. Our NAB clients will have access that is not available outside this collaboration.”

OurCrowd entered the Australian market in 2014 and has positioned itself as a leading provider to the local market of global alternative investment opportunities.

Managing Director, OurCrowd Australia and Asia Dan Bennett said: “the collaboration provides NAB Private clients a high quality globally focussed product with particular scope in USA, Israel and Asia-Pacific.

“We are excited about this venture with one of Australia’s leading Private Banks and sharing the very best of global technology investment with their deeply valued clients,” Mr Bennett said.

NAB is a top 30 global bank and Australia’s leading business bank and employs over 34,000 people. NAB serves individuals and business customers ranging from small and medium enterprises through to Australia’s largest institutions. Outside of Australia, NAB also supports businesses across New Zealand, Asia, the UK and the US to link with the Australian market.

OurCrowd is the leading global equity crowdfunding platform for accredited investors. Managed by a team of seasoned investment professionals and led by serial entrepreneur Jon Medved, OurCrowd vets and selects opportunities, invests its own capital, and brings companies to its accredited membership of global investors.

OurCrowd provides post-investment support to its portfolio companies, assigns industry experts as mentors, and takes board seats. The OurCrowd community of almost 20,000 investors from over 112 countries has invested over A$600M into 120 portfolio companies and funds. OurCrowd already has thirteen exits to date, two IPO’s and eleven acquisitions.

Snapshot of Marketplace Lending in Australia

ASIC has released a report today on its first survey of various participants in the marketplace lending industry.

Marketplace lending allows investors to invest in loans to consumers and small and medium enterprises (SMEs). It has the potential to provide another avenue of funding for business and consumers.

ASIC conducted the survey on a voluntary basis between November and December 2016 and focused on marketplace lending providers’ business models and activities for the financial year ended 30 June 2016.

Here are the main findings:

Loan origination fees accounted for approximately 83% of total fee revenue and the remainder of the revenue was almost exclusively generated from investors. The high proportion of origination fees may be partly explained by the fact that most providers have not been operating for a long period of time—any fees collected through interest payments may not be fully realised until future years.

Respondents promoted their product to a range of different borrowers, which fell broadly under the category of consumers (i.e. individuals) or non-consumer/business borrowers, such as SMEs, self-managed superannuation funds (SMSFs) and agribusiness.

As at June 2016, the eight entities who responded to the second part of the survey reported a total of 7,448 borrowers, consisting of 7,415 consumer borrowers and 33 business borrowers.

The survey results indicate that the industry is predominantly comprised of investors that are wholesale clients. However, some respondents that are currently wholesale-only providers have indicated that they intend to broaden their marketplace lending product offering to retail client investors in the future. The fact that many providers operate registered schemes seems to suggest that they may have plans to, or may wish to have the option available to, offer their marketplace lending product to retail client investors in the future.

Loans available on marketplace lending platforms may either be secured or unsecured. Two respondents provide loans on an unsecured basis only, while one respondent indicated that all its loans are secured (such as by way of a charge against all the borrowers’ assets or by registered first mortgage). The remaining respondents indicated their loans may either be secured or unsecured. The security is held for the benefit of the investors.

In most cases, requests for loans are assessed and assigned a risk grade and interest rate before they are made available for viewing and selection by investors. Most respondents indicated that interest rates are generally set by the provider and investors do not determine or influence the rate. Investors may choose the loans they wish to invest in based on the interest rate and/or risk grade allocated to the loan.

Loan amounts offered to consumer borrowers typically range from $5,000 to $80,000, while for business and other non-consumer borrowers, the amounts range from $2,001 to $3,000,000. None of the respondents provide small amount credit contracts or ‘payday loans’.

Most respondents indicated that they provide a grace period for borrowers in the event of missed or late repayments. All respondents indicated that reminders and direct engagement with the borrower are undertaken by the platform provider and that a repayment arrangement may be agreed with the borrower. Referrals to external collections agencies would be made if the loan remained delinquent. In one case, it was noted that recovery action would require the consent of the lenders for the particular loan. One respondent noted that problem SME loans require a more tailored process compared to consumer loans. Most respondents indicated they do not stress test their loan book, largely due to the relative newness or small size of current loan books which would not produce any meaningful assessment. However, two respondents do undertake some testing.

Commissioner John Price said, ‘As a relatively new industry, it is important for ASIC to engage with and better understand the business models of marketplace lending providers.

‘The survey responses have provided valuable insights into these businesses. We acknowledge and appreciate the participation of survey respondents’, he said.

Report 526 Survey of marketplace lending operators (REP 526) summarises ASIC’s findings from the 2016 Marketplace Lending Industry Survey and outlines ASIC’s role and recent activities in regulating the sector.

The responses to the survey showed that during the 2016 financial year, $156 million in loans were written to consumers and SMEs. Respondents reported a total of 3,201 investors and 7,448 borrowers as at 30 June 2016. Provider revenue was predominately tied to loan origination, and respondents were aware of the conflicts that arose as a result. The number of complaints received by providers was generally low at this stage.

Since the commencement of ASIC’s Innovation Hub in March 2015, ASIC has engaged with 34 marketplace lending providers to assist them to better understand the requirements under Australia’s regulatory framework. This has included specific regulatory guidance and examples of good practice.

ASIC has also granted waivers of some obligations under the law to facilitate six marketplace lending business operations, while maintainingappropriate investor protections.

ASIC will continue to monitor developments in the marketplace lending sector. ASIC is keen to assist marketplace lending providers and engage with new fintech businesses and industry organisations through its Innovation Hub.

Background

In Australia, there is no bespoke regulatory regime for marketplace lending. The regulations that apply to marketplace lending depend on how the business is structured, what financial services and products are being offered and the types of investors and borrowers involved.

In most cases, ASIC has identified that the provision of marketplace lending products involves the operation of a managed investment scheme, which would require the marketplace lending provider to hold an Australian financial services licence. Where the loans made through the platform are consumer loans (i.e. loans to individuals for domestic, personal or household purposes), an Australian credit licence is alsorequired.

Fintechs Eye The Mortgage Market

From Fintech Business.

Speaking at a media roundtable in Sydney this week, SocietyOne co-founder Greg Symons said there is a class of mortgages that could suit “exactly what we do”.

“We will look at that in time, probably through a partnership of some kind,” Mr Symons said.

“The fact is it’s very cheap debt and very low capital that goes into it. The problem is the margins of play are very tight, whereas there is a second tier of mortgage lending with a lower LVR, a different form of mortgage lending that actually would fit well,” he explained.

“It is more like a syndicated loan style opportunity, which essentially is just low-volume peer-to-peer. The thing is, you’ve got to change your thinking. You’ve got to move away from this pooled investment style to something that is more individual based.”

Mr Symons said he built SocietyOne and the technology underpinning it to ensure that the company doesn’t exclude itself from certain asset classes that are a natural fit.

However, SocietyOne’s newly appointed chief investment officer John Cummins, who was also present at Wednesday’s discussion, said there is little “juice” in mortgages, echoing Mr Symons comment about tight margins.

The group has over 280 funders including Australian banks, credit unions, high net worth individuals and SMSFs.

Mr Cummins said mortgages are a difficult market to get high net worth investors into.

“The structures are really set up for institutional. To go in and nakedly invest in mortgages… I know it has been done overseas. It’s just a bit more challenging here because you have established an investment structure now that looks like an amortising structure with a whole lot of variable rate mortgages in it,” he said.

US-based online lender SoFi, which is planning an Australian mortgage market play, has successfully managed to move from a peer-to-peer lending offering student loans to a balance-sheet lender offering home loans.

The company has made clear its ambitions to grow beyond lending to provide a fuller, more holistic banking-like offering to customers including deposits, credit cards and payment solutions. It is currently preparing to launch its first mortgage securitisation deal.

SoFi this week announced the acquisition of Delaware-based mobile banking group Zenbanx, which has been pioneering ‘conversational banking’.

SocietyOne hits $200m milestone

According to Australian Fintech, SocietyOne, Australia’s marketplace lender, has achieved another key milestone after breaking through the $200 million lending mark.

The last three months of the 2016 calendar year have witnessed the strongest growth in the company’s four-year history with an additional $50 million of lending made between the first weeks of September and mid-December. November saw a record month of more than $15.3 million in lending.

That took the total amount of lending made by SocietyOne to just over $200 million since inception of which $126 million – nearly two-thirds of the total – has been recorded in 2016 alone, said Jason Yetton, SocietyOne’s Managing Director and Chief Executive Officer.

The year had seen strong demand from both borrowers of personal loans and investors with every dollar lent matched by a dollar in funding from wholesale investors such as life companies, mutual banks, credit unions, SMSFs and high net worth individuals through SocietyOne’s digital auction marketplace. The total number of investor funders has now grown to 280 since the company started lending in August 2012.

“2016 has been a milestone year for several reasons, not least for the fact of us reaching a total of $200 million in lending which makes us the clear leader in marketplace lending for consumer finance in Australia,” said Mr Yetton.

“Having started the year with $70 million of originated loans since we commenced in August 2012, we have virtually tripled that amount in the last 12 months with an additional $126 million of lending to our personal loans and agri-lending customers. This is a real testament to the vision of the company’s co-founders, Greg Symons and Matt Symons, and the hard work of everyone at SocietyOne.

“We are now looking forward to an even better year to come in 2017 as the opportunity opens up for us to mount a real challenge to the big four banks in the $20 billion personal loan market and the wider $100 billion consumer finance market. This is part of our goals to achieve a 2-3 per cent share of the consumer finance market by 2021 and helping over 100,000 Australians to get a better deal.”

Mr Yetton’s comments came as SocietyOne released its latest performance figures, which show:

An acceleration in quarterly lending in the three months to December. SocietyOne topped $100 million in total originated loans in early-April this year, up from $70 million at the start of January, and then reached $150 million in early-September;

Available funding from investors for borrower customers has averaged $22 million a month for the past six months;

The effective annualised rate of return across the company’s portfolio of two year, three year and five year personal loans has averaged 10.66% p.a. between January 2014 and the end of November 2016(a) ;

The number of borrower customer accounts has grown by a further 1,800 since August 2016 to now stand at 7,800 at December;

Default rates of the personal loan portfolio as at the end of November 2016 were 1.1% compared to a sector average of 2-3%.

“The momentum we saw in the first half of the year has increased in the second half following our successful national TV brand campaign that was launched during the Rio Olympic Games on Channel 7,” added Mr Yetton.

“Hundreds of thousands of Australians have been empowered with their personal credit information through getcreditscore.com.au and are now aware that they can get personal loans tailored to their individual circumstances without having to turn to their major bank. Since June, the number of Australians who have obtained their credit score has risen by nearly 450,000 to 800,000 now.

“At the same they are also discovering that there is a better, trusted alternative to the one-size-fits all, higher comparison interest rates the traditional big banks offer.

“That alternative now includes even better reasons for customers to tackle the financial issues that matter to them, whether it’s consolidating credit card debt, renovating their home, buying a car, taking that well-deserved holiday, paying for the wedding of their dreams or covering off those ever-increasing school fees.

“We’re now offering interest rates that are up to 1.4 percentage points lower than our previously publicised rates as we look to help out Australians at what is arguably the most expensive time of the year as Christmas, the summer holidays and back to school come together in one huge spending moment.

“We are also responding to borrower demand by increasing the limit available on our personal loans from $35,000 to $50,000 which will give our customers the financial flexibility they are looking for.”

Mr Yetton also announced two changes to SocietyOne’s management team with the appointment of Maria Loyez as the company’s new Chief Marketing Officer and the resignation of Company Secretary Jerry Yohananov.

The impact of P2P lending on conventional banks

A working paper from staff at the Bank of England “Peer-to-peer lending and financial innovation in the United Kingdom” looks at the P2P lending market in the UK. As well as looking at the geographic dispersion of lenders and borrowers, they also make some observations about the future impact of P2P on traditional banks. First, they expect to see a fall in the interest rate charged on unsecured personal loans, which will put pressure on bank profitability in this product line, and second, P2P platforms offer a model for banks as they shift their distribution channels from bricks-and-mortar branches to internet and mobile services.

Although there is P2P lending to fund businesses and real estate, we think consumer credit is the area where banks will face most competition from online platforms. In part, this is because it is the asset class in which P2P emerged and is most mature. For example, one striking fact to emerge from Nesta’s survey of the industry is the difference in the credit profile of individual and business borrowers on P2P platforms.

In the P2P market for personal loans, 59% of respondents sought funding from banks at the same time they applied for a P2P loan, and 54% were granted it but chose to fund themselves via the platforms. By contrast, in the market for P2P business loans, 79% sought funding from banks but only 22% were granted it. One interpretation of these results is that, while banks and P2P platforms are operating with different credit risk and lending models when it comes to business loans, P2P platforms are actually competing away some customers from banks in the unsecured personal loans market.

Looking ahead, unsecured personal loans are the market where P2P platforms are likely to continue to make inroads against banks. In contrast to the retail mortgage and deposit market, no British bank has a dominant position in consumer credit. In addition, British banks’ unsecured lending is typically a small component of their overall balance sheet.

The results of this competition could be good for consumers, increasing the availability of unsecured personal credit while lowering its price. This would amplify recent trends. Last year, UK banks increased their issuance of unsecured personal loans, and quoted interest rates on these fell sharply. However, we caution that P2P platforms still trail banks by some distance in terms of their share of the unsecured personal loans market. For example, in Q4 2014, the net lending flow to individuals through P2P platforms was just over £70 million, while those from UK banks and building societies topped £2 billion.

A second, longer term, less direct but still important impact we expect P2P lenders will have on banks is in how they interact with consumers. Over the last two decades, banks have taken steps to move their customers online to reduce costs from operating physical branches. By some estimates, 30 to 40 percent of retail banks costs in the UK come from running physical branches, even though footfall in them has been falling at 10 percent per annum in recent years, possibly because younger generations are more comfortable doing business just online. This means banks are likely to accelerate the transition of their customers from brick and mortar branches to Internet browsers. As this happens, we anticipate banks will look to P2P platforms for inspiration in how to redesign their websites, as these are often noted for being slick and speedy because, for example, they incorporate videos, pictures and communication channels for investors to interact with borrowers.

Note: Staff Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Any views expressed are solely those of the author(s) and so cannot be taken to represent those of the Bank of England or to state Bank of England policy. This paper should therefore not be reported as representing the views of the Bank of England or members of the Monetary Policy Committee, Financial Policy Committee or Prudential Regulation Authority Board.

ASIC issues guidance on marketplace lending

ASIC today released guidance to help providers of marketplace (also known as ‘peer-to-peer’) lending products, including information about legal obligations.

ASIC Commissioner John Price said ‘We want to help innovative start-ups understand the regulatory framework they are operating under.’

‘Marketplace lending is a new innovative product and this information sheet is an example of how ASIC’s innovation hub is helping innovative businesses understand their regulatory obligations to support them to grow and develop in Australia,’ he said.

The information sheet describes the current regulatory regime and we will review the guidance in light of any future changes in the law or business structures. The information sheet also includes good practice strategies that marketplace lenders may consider adopting.

‘Adopting some of these good practices can help investors understand the product and risks and build community trust and confidence in marketplace lending more generally,’ Commissioner Price said.

A number of marketplace lending entities were consulted in preparing the information sheet. ASIC thanks these entities for their participation in the consultation.

Fintech start-ups looking to provide marketplace lending are encouraged to use this information sheet to help them understand current regulatory requirements. ASIC also encourages fintech start-ups to apply for help from the Innovation Hub, if they meet eligibility criteria. Information about the hub, including eligibility criteria for help, is available on ASIC’s Innovation Hub.

Download

Information Sheet 213 – Providers of Marketplace Lending Products

Background

Marketplace lending matches people who have money to invest with people who are looking for a loan. These arrangements commonly involve the use of an online platform, such as a website.

SocietyOne Has Now Lent $60m in Total Loans

According to Australian Broker, peer-to-peer (P2P) lender SocietyOne has announced a major milestone this week, surpassing $60 million in total loans, with year-to-date loan volume already tripling the company’s loan originations during 2014. However, the chief executive says it is the type of growth that really demonstrates the value of the P2P proposition.

Since its launch the P2P lender has have seen a big shift from non-conforming borrowers to high-quality borrowers. In fact, SocietyOne’s growth this year has been driven largely by high-quality borrowers leaving the major banks.

“Right at the very start, literally at day one, there was certainly a higher proportion of people who may not have met the bank scorecard. However, there has been a pretty steady trend over the last three years where the average Veda score of all applications on any given week continues to go up as more and more.

“People who have a banking relationship have started to ask themselves if they are paying more than they should be for their existing personal loan or more than they might otherwise like to for the carry forward balance on their credit card.”

According to data from SocietyOne, the median yearly income of their typical borrower is approximately $82,000 and their median credit score is 742. The most common job titles of their typical borrower are professional (34%) and manager (22%).

SocietyOne chief executive Matt Symons says this not only proves the value proposition of P2P lenders, but the opportunity they have to significantly disrupt the market.

“I think there are opportunities for marketplace lenders, like SocietyOne, which are just inherently more efficient and competitive to offer a range of borrowers a great deal. I think the big thing is that historically in Australia, everyone has paid the same price. What we have pioneered in Australia – as the first marketplace lender to launch in Australia three years ago – was risk-based pricing in consumer credit,” he told Australian Broker.

“It is great to see Australians taking back control of the sort of information that banks and other institutions have traditionally always had on all of us as consumers and getting the benefit of that themselves. It is that kind of revolution where the power is being put back into the hands of the customer to make better choices about what financial services products meets their needs.”

P2P lending likely to offer home loans

From Australian Broker Online.

Peer-to-peer (P2P) lending is likely to move into residential mortgages in Australia, according to a global peer-to-peer lender.

Speaking to Australian Broker, the CEO of ThinCats Australia, Sunil Aranha, P2P lending globally has already moved into residential mortgages so it is likely that Australia will follow suit.

“In terms of moving platforms into mortgage lending spaces, that has happened in the UK and the US and to a certain extent it will be something that will eventually happen in Australia. There is no reason stopping it, other than today it is not really attractive for anybody because the banks are doing it very well,” Aranha said.

“I don’t think peer-to-peer platforms have much of a part to play [in residential] right now, unless it can add value and the value it can add is to fractionalise lending. But eventually that will become a reality as it has in the UK and the US… That will happen.”

However, Aranha said ThinCats, which operates in the SME lending market, is unlikely to move into residential mortgages.

“We are focussed on business lending. There may be some loans that we do which are secured by second mortgages but the purpose of our loan will really be for a business to be able to use as a cash flow to grow their business,” Aranha told Australian Broker.

“We want to focus on that market that is not serviced, and in my opinion, it is about $10 billion of un-serviced market — which means banks don’t actually lend to that market.”

Since ThinCats Australia – which is 25% owned by leading UK P2P lender, ThinCats UK – launched in December 2014, the platform has arranged loans aggregating close to $2 million to date at interest rates ranging from 11.5% to 14.5%.

The platform has also just welcomed well-known finance commentator, Alan Kohler, as a shareholder.

Looking at 2016, Aranha told Australian Broker that he expects ThinCats to be providing $1 million a month in loans to Australian SMEs.

“In terms of pipeline, I believe that by the second quarter of next year we should be actually doing $1 million plus a month,” he said.

“That is the growth we are currently on so by the end of next year I hope to actually say that purely on organic growth, without something sudden and exciting happening, we should be able to do about $8 million to $10 million next year.”

Alternative Finance Set to Boom in Australia

From Australian Broker Online. Australia could be the next burgeoning market for alternative forms of finance, if regulators keep up with consumer demand.

Speaking to Australian Broker, Luke Deer, a post-doctoral research associate at the University of Sydney, said Australia is ripe for disruption from alternative and innovative forms of finance – namely peer to peer lending and crowdfunding.

“I think there will be rapid growth in alternative finance in Australia in the coming years. I think a lot of the platforms have just been started in a very uncertain regulatory environment and that is something which has probably hampered their development to date,” he said.

“However, as that regulatory situation becomes clearer and is modified to take account of these new types of financing arrangements then I think the use and the scale of it will increase rapidly.”

Peer-to-peer (P2P) lending has already started to gain traction in the Australian finance market, with SocietyOne being the first P2P lender to launch in Australia in 2012 with a number of other platforms following suit.

Although P2P lenders are still yet to break into the residential mortgage market in Australia – instead currently focussing on debt consolidation, personal loans and SME lending – a number of them have already entered the third party channel.

According to Deer, as the regulators recognise the increasing strength of P2P lenders and adapt legislation accordingly, the market is likely to see a number of more new entrants.

“What has happened at the moment is peer-to-peer lenders in Australia have been able to operate under the old legislation, however, that legislation applies to much bigger financial institutions. To the extent there are modifications to those regulations in the future, this will be more entrants into this market and they will be able to provide financial solutions more efficiently than encumbered players in those markets.”

Deer says the growing demand for alternative forms of finance, such as P2P lending, will be driven by the next generation of financial consumers.

“There other thing is with the uptake of the internet and social media, it is becoming more natural for younger generations in particular to increasingly do financial transaction online – and why limit that to banking? Why can’t they be able to do that for a whole range of different financial needs?” he told Australian Broker.

“…as far as we can tell from other studies we have done it will be the millennial generation in particular which will grow up where banking and finance is going to be more widely available and more mobile than it has in the past, which will ultimately lead to new forms of financing.”

Peer-To-Peer Lending, The US Experience

DFA has been tracking the progress of Peer-to-Peer lending, and it continues to grow fast round the world. Here is a summary from the Lending Mag covering the best U.S. Peer-to-Peer Lending Sites for Borrowers. It is quite interesting comparing the different business models, charging structures and sheer scale of lending through this channel. In the US, at least, it is becoming a valid alternative funding source.

#1 Prosper Marketplace

Prosper Marketplace is The Lending Mag’s first choice among U.S. peer-to-peer lending companies for borrowers. This popular p2p lending platform made history in the United States when they became the first peer-to-peer lending site in the country in 2006. Since that time, Prosper has experienced tremendous growth and success, having recently surpassed $3 billion in loans. Recently, they were named by Forbes as one of the most promising companies in America.

Prosper places as number #1 on our list of p2p lenders because of the accessibility and attention to customers that they provide. Out of all the p2p lenders we have had interactions with, Prosper representatives were the most accommodating and reachable. You don’t feel like you are dealing with a cold, unreachable entity. You can sense the humanity behind the big name and they are there to help you. Here are more details about Prosper’s peer-to-peer lending site:

Maximum Loan Amount Available: $35,000

Minimum Loan Amount Available: $2,000

Average Time to Receive Funds (in days): 4 to 10 days

APR: 6.73% to 35.97%

Interest Rate: 6.05% to 31.90%

Term of Loan (years): 3 or 5

Minimum Credit Score Required: 640

Maximum Debt-to-Income Ratio: 30%

Loan Type (Secured or Unsecured): Unsecured loan

Application Affect On Your Credit: None

States Eligible To Borrow From p2p Lending Sites In Question: 47 + DC

Origination Fee: 1% to 5%

Late Fee: Greater of $15 or 5%

Unsuccessful Payment Fee: None

Check Processing: $15

Application Fee Charge: None

Prepayment Penalty Cost: None

Best Method of Contacting Their Support: Phone

#2 Lending Club

Lending Club is an absolute giant in the US peer-to-peer lending space. You really can’t talk about U.S. peer-to-peer lending without mentioning them. Their peer loans platform was founded shortly after Prosper in 2007, they’ve actually surpassed Prosper in the amount of loans funded. Many p2p loan investors feel that Lending Club’s website has the best user interface and it definitely has the largest and most impressive 3rd-party investor ecosystem.

In December of 2014 Lending Club had a wildly successful IPO on the NYSE, becoming the first publicly traded online peer-to-peer lender in US history. If this p2p lending site review was focused on investing, Lending Club would probably have been ranked #1. But getting approved to borrow through Lending Club can be a bit more difficult than with Prosper, knocking them to number #2 on our list from a borrower’s perspective. Here are more details about Lending Club’s peer-to-peer lending site:

Maximum Loan Amount Available: $35,000 ($300,000 for business loans)

Minimum Loan Amount Available: $1,000 ($15,000 for business loans)

Average Time to Receive Funds (in days): 4 to 10 days

APR: 5.99% to 32.99%

Interest Rate: 5.9% to 25.9%

Term of Loan (years): 1, 3 or 5

Minimum Credit Score Required: 660

Maximum Debt-to-Income Ratio: 35%

Loan Type (Secured or Unsecured): Unsecured loan

Application Affect On Your Credit: None

States Eligible To Borrow From p2p Lending Sites In Question:

Origination Fee: 0.99% to 5.99%

Late Fee: Greater of $15 or 5%

Unsuccessful Payment Fee: $15

Check Processing: $15

Application Fee Charge: None

Prepayment Penalty Cost: None

Best Method of Contacting Their Support: Phone

#3 Upstart

If you’ve recently graduated from college, you probably don’t need us to tell you how hard it is to convince a bank to give you a loan. Young people fresh out of college don’t usually have the type of income needed, enough credit history or a high enough credit score to get a reasonable loan rate, if you can get a loan at all.

This is where Upstart steps in. This innovative lending site began facilitating p2p loans in April 2014. They aim to help those who are under-served by traditional loan companies but are filled with potential. Instead of only judging creditworthiness from your credit score, employment history and income, Upstart looks at a wide range of nontraditional factors in order to determine whether you should get a shot at getting your loan funded. These other factors include which college you graduated from, your grade point average and it’s possible that they even take your SAT scores into account.

Upstart prides itself on looking past the cold numbers and saying yes to your requests when other lenders say no. Most of Upstart’s borrowers use the funds as debt consolidation loans in order to pay off high-interest credit cards, but you can use the funds as you please.

This fast-growing p2p lending site is becoming popular among Millennials especially because they are often in a situation where they don’t have a long track record of credit history and are often offered very high loan rates because of it. Taking a bad loan at an early age can easily set your financial life on the wrong road and Upstart realizes that such poor options are not necessary or fair.

Company officials have expressed that the company’s loan products are meant to serve a young and potential-laden population that is very likely to build a solid credit profile in the future, but just hasn’t had the opportunity to do so yet. By using their sophisticated algorithm to decipher key data, the peer-to-peer lending site is able approve the extension of consumer credit at affordable rates to young borrowers who are well-positioned to handle the loans responsibly.
Here are more details about Upstart’s peer-to-peer lending site:

Maximum Loan Amount Available: $35,000

Minimum Loan Amount Available: $3,000

Average Time to Receive Funds (in days): 2 to 16

APR: 5.67% to 29.99%

Interest Rate: 5% to 25.26%

Term of Loan (years): 3

Minimum Credit Score Required: 640

Maximum Debt-to-Income Ratio: 40% to 50%

Loan Type (Secured or Unsecured): Unsecured loan

Application Affect On Your Credit: None

States Eligible To Borrow From p2p Lending Sites In Question: 50

Origination Fee: 1% to 6%

Late Fee: Greater of $15 or 5%

Unsuccessful Payment Fee: $15

Check Processing: $15

Application Fee Charge: None

Prepayment Penalty Cost: None

Best Method of Contacting Their Support: Phone

#4 Funding Circle

Funding Circle is one of the world’s biggest peer-to-peer lending sites that actually focuses primarily on small business loans. They have a US counterpart to their peer to peer lending UK branch. They’ve facilitated more than $1 billion in loans to more than 8,000 businesses in the US and UK combined. Today, 40,000 retail investors (normal people), major banks, financial institutions and even the UK Government are lending to small businesses through the Funding Circle marketplace.

Funding Circle is intensely focused on helping small businesses get loans through their p2p lending site because they have roots in small business. Their U.S. co-founders started the peer-to-peer lending site because they were small business owners themselves, they were getting rejected for small business funding at every turn and after getting rejected for small business loans nearly 100 times, they realized something was very wrong with the traditional bank lending system, it was internally flawed. They saw first hand that even when you have a growing and successful business venture that’s doing well, it’s still far too difficult to get a business loan. From that point forward, they were more determined than ever to build a more sensible small business loan solution for American business owners.

Here are more details about Funding Circle’s peer-to-peer lending site:

Maximum Loan Amount Available: $500,000 for business loans

Minimum Loan Amount Available: $25,000 for business loans

Average Time to Receive Funds (in days): 5 to 14

APR:

Interest Rate: 5.99% to 20.99%

Term of Loan (years): 1 to 5

Minimum Credit Score Required: 620

Maximum Debt-to-Income Ratio: Not Disclosed

Loan Type (Secured or Unsecured): Secured loan

Application Affect On Your Credit: Hard pull on your credit

States Eligible To Borrow From p2p Lending Sites In Question: 47 + DC

Origination Fee: 2.99%

Late Fee: 10%

Unsuccessful Payment Fee: $35

Check Processing: $0

Application Fee Charge: None

Prepayment Penalty Cost: None

Best Method of Contacting Their Support: Phone

#5 Peerform

Peerform was started by Wall Street executives with extensive backgrounds in Finance and Technology in 2010, the peer-to-peer lending site’s creators saw an opportunity to make funding available to borrowers when they noticed that banks seemed unwilling to lend to people and small businesses in need.

Peerform has built a good track record of giving borrowers an opportunity that the banking system had denied them and a very positive experience when seeking unsecured personal loans through an online lending process that is transparent, fast and easy to understand.

To apply for an online peer-to-peer loan from Peerform, you fill out the application on their site and they will make a soft pull on your credit to see if you meet the minimum requirements for a loan. They are one of the few major peer-to-peer lending sites that accepts borrowers with FICO scores as low as 600. Those who qualify for a loan have their loan request posted on the website and it stays active for 14 days while peer-to-peer investors decide if the loan is an attractive investment or not. If your loan is fully funded within the 2 week time period, you’ll be contacted by Peerform to approve and accept the loan. If your loan is not fully funded in the 2 week time period but has raised at least $1,000, you may choose to accept or reject the lesser amount. It is completely your call, you are not obligated to accept the loan. If you do choose to accept the loan, it will be deposited to your bank account within a few business days.

When we tested their customer service and contacted Peerform, we had positive experiences both via email and on the phone. After sending an email we received a written response within 24 hours, and most of our questions were answered to satisfaction. When talking to them by phone, we noted that the company rep was very knowledgeable about the loan process and able to give helpful answers. Their site also provides all of the most important information you’d need to know about their peer-to-peer loan process, including APRs, interest rates, potential loan amounts and fees, etc. You can also contact a customer rep using the live chat option they have on the website. Here are more details about Peerform’s peer-to-peer lending site:

Maximum Loan Amount Available: $25,000

Minimum Loan Amount Available: $1,000

Average Time to Receive Funds (in days): 2 to 16

APR: 7.12% to 28.09%

Interest Rate: 6.4% to 25%

Term of Loan (years): 3

Minimum Credit Score Required: 600

Maximum Debt-to-Income Ratio: Varies

Loan Type (Secured or Unsecured): Unsecured loan

Application Affect On Your Credit: None

States Eligible To Borrow From p2p Lending Sites In Question: 23

Origination Fee: 1% to 5%

Late Fee: Greater of $15 or 5%

Unsuccessful Payment Fee: $15

Check Processing: $15

Application Fee Charge: None

Prepayment Penalty Cost: None

Best Method of Contacting Their Support: Phone

#6 Sofi

Sofi is a highly respected marketplace lending website, with nearly $3 billion in peer loans issued to this date.

They made it onto this peer-to-peer lending sites review because they do a good job at assisting early stage professionals accelerate their success with student loan refinancing, mortgage refinancing, mortgages and unsecured personal loans.

Their nontraditional loan underwriting approach takes into account merit and employment history among other determining factors, in effect, allowing their peer-to-peer lending site to offer loans that often are hard to find elsewhere.

Here are more details about Sofi’s peer-to-peer lending site:

Maximum Loan Amount Available: $100,000

Minimum Loan Amount Available: $5,000

Average Time to Receive Funds (in days): 3

APR: 5.5% to 8.99%

Interest Rate:

Term of Loan (years): 3, 5 or 7

Minimum Credit Score Required: Varies

Maximum Debt-to-Income Ratio: Varies

Loan Type (Secured or Unsecured): Secured loan

Application Affect On Your Credit: None

States Eligible To Borrow From p2p Lending Sites In Question:

Origination Fee: None

Late Fee: Lesser of 4% or $5

Unsuccessful Payment Fee: $15

Check Processing: $15

Application Fee Charge: None

Prepayment Penalty Cost: None

Best Method of Contacting Their Support: Phone

Read more: http://thelendingmag.com/peer-to-peer-lending-sites/#ixzz3en8E6bSg