Friday, March 21, 2008


Like mushrooms after the spring rains - that's what I'm likening Internet lending sites (P2P or "crowdsourcing" lending sites lending money on the Internet).

First in the United Kingdom, there was Zopa. Then came Prosper here in the US, followed by LendingClub, then Zopa US (as well as a horde of cheap knock-offs and imitations that seem patently unsafe) and the perennial in-beta Loanio. Most recent arrival I've spotted is Fynanz - a private student loan site.

I'm still reading the help and introductory files, but the superficial resemblance to Prosper is eerie. However, unlike Prosper, they're not even bothering to say who is behind the business. Does that mean they don't have significant backing? That would mean that their Default Prevention & Guarantee Fund (Guarantee Fund) doesn't have much muscle behind it. In fact, they're opening it up with $250,000 and will maintain it at that level or at 5% of their guaranteed loan amounts.

Funny thing, we know from Prosper's experience that loan defaut rates are much higher than that if you permit lenders to bid on listings. Also, all repayments to lenders come off the top of the guarantee, this means that the late defaulting loans may not compensate lenders at all.

There's also the term - 10 years? With an option by Fynanz to repurchase after each anniversary? I'm not sure I understand this part.

Anyway, I'm still reading.

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