Monday, April 21, 2008


My one and only bid on Fynanz seems to be about to turn into a loan. I bid $50 on this listing, just to see how the process works. In the early stages, when I had some issues with my account, the Fynanz Customer service guys seemed right on the ball. They have not only phone suport, but also online chat support, which is my preferred way of getting help from companies I deal with.

As for the loan to Dano34, it's 7-% guaranteed under the Fynanz guarantee - that somehow makes it feel a bit safer than just simply lending to a student.

And by-the-way, Fynanz got a write-up in American Banker (to read the piece, registration is required). There's a lot of interesting allusions in that article. Here are some (in no particular order).

  • Fynanz has a fair amount of lending cash lined up, but it is tied to specific schools, so until they get applications from those scools, they can't turn that cash into loans. The flip side of this is that some of the more "deserving" schools where they might see more loan demand from, is probably not going to fund as easily.
  • Fynanz is staking a lot on their underwriting criteria. They investigate loan applications before the listings goes live. If the listing seems problematic, it never sees the light of day on their wesb site. Similarly, if the listing doesn't make sense for the student (such as applying too early), Fynanz might turn the listing down.
  • The big thing from Fynanz's perspective is that they share in the risk in two ways. Firstly, if a loan is nearly funded, they might kick in the additional funds to fully fund the loan. Additionally, they have a loan guarantee that is intended to play a role in safeguarding the lenders' investment to a certain extent.
  • As private student loans, these loans have some protection against bankruptcies.
  • There seems to be some willingness from Fynanz to buy back loans after some period of time (1 year?) if lenders wants out. Clearly they won't be in a position to do this for all loans and they make it clear on their website that any such buy-back will be at a discount to the loan value, but it is a way out for those lenders that might be unable to hang on to loans for their entire duration.
Now that my first loan is in the works, I might stick my toe in a little further and bid on a second loan. I'll take it easy - much slower than I did on Prosper where initially I bid on about two loans a month. Here I might just bid on 10 loans total by the end of the summer, just to see how things will work out.

Somehow I'm hoping Fynanz comes up with a clear-cut solution to what I consider to be my biggest problem in lending on Fynanz - the loan duration. I'm more or less OK with 5-year terms, but I'm not comfortable tying up any substantial amount of money for a 10- or 20-year term. And I'm not sure how well the buy-back offer will work. In a year's time I might try that out, just to get a feel for the process.

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