Another One Bites The Dust. Loanio Has Sold Code for Cash.

American peer-to-peer lending platform Loanio appears to be vanishing as well.

The company, which originally launched in October 2008 has only issued seven loans, one if which is now thirty days past due.

The latest amendment to their S-1 filing (August 14) discloses that they’ve permanently licensed their source code to an unnamed corporation. The code was sold for $375,000, of which $100,000 was the down payment, and the remainder will be paid over 18 months. The blog p2plendingnews.com notes that the Loanio engineering team has shrunk from five full time engineers to three part timers since their last filing with the SEC.

Jessica Ward is a freelance writer and blogger from Seattle. She blogs on family and frugality at The Pennywise Family and DebtKid.

Say it Ain’t So! Could Pertuity Direct Be Gone?

I received a tip in my email box that a special meeting of shareholders occurred on August 21st for the board of Trustees at the National Retail Fund III. The purpose of the meeting was “to approve the liquidation and distribution of all shares of the fund.” Oh snap!

Say it ain’t so? Could Pertuity Direct really be leaving us? They’ve been pretty quiet in recent months, not issuing a press release since March, and no blog posts since May. A couple of months ago their Commission Junction account deactivated without warning to advertisers (I was very surprised by this as I’d been running their ads for some time on my Pennywise Family blog). Keep in mind, the company only went "live" in January of 2009.

A few prominent PD figures have recently vanished from the Twitterscape.

Today I tried to call, but the telephone numbers have all vanished from the Web site. I found a number for Gemini Fund Management, the “transfer agent” for National Retail Fund III. I don’t remember them being part of the picture when I interviewed the PD team back in March, but that is the sort of detail I may have forgotten.

I asked for a telephone for PD and found the number disconnected and forwarded, to CEO Kim Muhota’s cell phone. When I spoke to them in the Winter, I seem to remember there being a staff of eight, so this seemed like an unlikely transfer.

I’m still trying to figure out what’s going on, but for now this is where it stands—it looks like Pertuity Direct may be gone. I’ll post an update to verify when/if I’m able to learn more.

Jessica Ward is a freelance blogger and writer based in Seattle. She blogs on frugal living, and family life at www.thepennywisefamily.com.

Another Peer To Peer Lender in Spain: Lubbus

Lubbus is another Peer to Peer lender in Spain that I just learned a little about today. They’ve been in business since 2008, but the site launched on April 19th, being the first P2P lender in Spain. Another interesting thing is that Lubbus offers a secondary market like Prosper does.

I ran across an interview with the CEO online and at the time (sadly the article was undated) the hold up in licensing was data-authority security regulation (i.e. Web site security). Unsure if that has been resolved or not, but the site does appear to be functional.

Unfortunately, Lubbus.com is very graphics-intense, so computer translators don’t translate it well. If you read Spanish—would you take a look and see if you can tell what’s going on? I’d sure appreciate any help on that.

Comnitae offers P2P Loans in Spain

Comunitae.com has begun offering peer to peer (P2P loans in Spain).

According to Comunitae funded ten loans during June—their first full month of Activity. Comunitae is a bid-based peer to peer platform, similar to prosper. There are 5,000 registered users on the Web site, but only 645 are active investors and 780 are borrowers.

In the Comunitae system, borrowers are ranked by risk as “A,” “B” or “C” and interest rates range after bidding from 7-12%.

Jessica Ward is a freelance writer based in the Seattle area. She writes on personal finance, family and adoption. Her Web site is www.jessicaward.me.

Zopa to Re-Launch In Italy

After being closed down for peer to peer loans since July, Zopa has reached an agreement to re-open in Italy in September. Loans already issued were being serviced but no new ones were made.

What makes this interesting is what caused the shut down. It wasn’t the peer-to-peer platform, or unregulated securities as in many other places—but the holding accounts where funds were held between being deposited and being applied to the fully-funded loan.

Because these “transit lender accounts” were aggregated they resulted in a sum warranting regulation by the Italian government.

Now Zopa will establish separate accounts for each lender, and re-developing their system to accommodate. They expect to be back online at the beginning of September.

Jessica Ward is a freelance writer from Seattle. You can also read her posts on www.debtkid.com and www.pennywisefamily.blogspot.com.

Back to School with Peer To Peer Loans

TuitionU is now offering two funding methods for college students seeking supplemental tuition funding.

They’ve partnered with GreenNote to offer peer to peer student loans at 6.8% plus a 2% origination fee. Lenders will get a 5.8% return on their investment with a $100 minimum investment. These student loans are disbursed to the institutions instead of the student, so you can feel good about not funding a keg party on Friday night with your investment. Not only can students solicit student loans online but they can also invite friends, families and social networks to contribute towards their loan. Prospective investors can search which loans to fund based on school affiliation, major, sports or even Greek societies.

Additionally, TuitionU is partnering with National Lending Associates to allow tuition loans to be stretched from the usual ten months to over ten years.

TuitionU is a division of Cology and makes its money by charging loan origination fees on the loans it issues. In 2008, 15 lenders offered $125 Million in private loans to students. This year, more than 100 Lenders are prepared to offer $400 million in loans.

The TuitionU alliances come at an excellent time, as Fynanz left the US market back in January as a provider of peer to peer student loans.


Jessica Ward is a freelance writer based in Seattle, WA. She writes on personal finance, family and frugal living. You can follow her on twitter as @jessc098 or visit her online at www.pennywisefamily.blogspot.com

P2P Lending Co. NanoFin opens in India

NanoFin Enterprises, opened this month in Chennai, India to provide peer-to-peer lending using the Internet, similar to Prosper Marketplace and Lending Club.

According to a company press release, the venture is an attempt to consolidate the unorganized credit market and bring the borrower and lender under one roof for transacting business.

The initiative will facilitate direct interaction between lenders and borrowers in the same local area (matching lenders and borrowers via geography vs. risk like American firms). Loans will be available for education, personal, auto, business, home and equipment ranging from Rs 5,000 to Rs 2 lakh. (The smallest loans will be about $100 USD).

Nonofin will offer lenders and borrowers the opportunity to agree together on the amount of the loan, interest rates and the terms and conditions of the loan. In the NanoFin model, lenders must pay a fee of Rs 1,000 (about $20 USD) to become a member of NanoFin’s community.

I can’t help but wonder how they’ll manage the geographical matching of borrowers—what if a loan goes bad? Will there be a concern about neighbors taking enforcement of the loan into their own hands?

The Web site is available in English at www.nanofin.net.

Jessica Ward is a freelance writer based in the Seattle area. She writes on family, money and more. You can read more at www.jessicaward.me or www.pennywisefamily.blogspot.com

SacBee article about Peer to Peer Lending

I was interviewed last week on the subject of peer to peer lending. My comments aren't quite in context, but this is a nice intro/overview to peer to peer lending in the Sacramento Bee.

The points that I shared with the reporter are:
1. Lenders will have to see good management of receivables by their selected P2P companies to make P2P lending a long term "sticky" trend.
2. Borrowers will have to get a better interest rate than they can with traditional banking. If credit markets loosen up again when the economy calms down, I'd like to see P2P lending hold on, but if interest rates go down for borrowers, they're not getting better for lenders--how will P2P companies respond to hold on to lenders? My hope is that they'll lower their administrative fees and they'll be able to based on economies of scale. That said, I don't know how much administrative cost there is to running a P2P company, and I don't have a sense for how much the industry can benefit from scale.

I think Lending Club's IRA product is a very good way of hanging on to lenders longer-term.

This all presumes of course (my presumption) that credit will become less expensive in the consumer market. Consumer debt interest rates and credit availability cycle up and down, and my assumption here is that the current market will eventually relax.

Jessica Ward is a freelance writer and blogger from Seattle. She also blogs at www.pennywisefamily.blogspot.com and is guest bloging at www.debtkid.com.

Loanio Files S-1 With The SEC

Loanio.com of Nanuet, NY, has filed an S-1 with the Securities Exchange Commission as of June 22, 2009.

This is the first major step in resuming US peer-to-peer loan operations. Loanio opened in October of 2008, but put loans on hold shortly thereafter to come into compliance with the securities regulation.

The S-1 is filed, but not yet effective, so Loanio's P2P platform isn't available yet to borrowers or lenders. We'll keep you updated as we hear more about a launch date, or specific information about the states that Loanio will be approved to operate in.

Jessica Ward is a freelance writer based in the Seattle area. She also writes about adoption at http://www.jessc098.blogspot.com/. You can follow her on twitter at www.twitter.com/jessc098

Dating Web Site Seeks P2P Loans Via Virgin Money USA

New York-based dating Web site GetSteady.com is seeking peer to peer loans for growth of its US business operations.

I interviewed its’ founder and President Michael Zuyus via email this week to learn more about the company’s plans for growth and how they are applying peer-to-peer lending to their business plan.

GetSteady.com is a dating web site which caters to the gay, lesbian, bisexual, and transsexual (GLBT) community. The company is seeking loan proposals via Virgin Money’s “Business Builder” product, which is a promissory-note negotiated between the lender and the borrower, and then enforced and managed by Virgin Money USA. GetSteady.com promises interest rates better than traditional investments including savings accounts, CDs and blue-chip stocks.

Mr. Zuyus prefers not to disclose the amount of capital he hopes that this effort will raise, but is seeking minimum loans of $1,000. He has also declined to comment as to if anyone has elected to fund one of these loans.

The company makes an interesting differentiation between peer-to-peer loans as investments. I asked Mr. Zuyus if investors are guaranteed in any way to receive repayment, and he replied “I would like to stress that we do not have investors. If a bank granted my company a loan, they would not be an investor, it’s simply a business loan. In this case, it is a peer business loan.” I found this an interesting re-branding of peer-to-peer loans after hearing the term “investment” thrown around so frequently in reference to peer lending. (I can’t help but wonder if we’ll see this nomenclature adopted more broadly across the industry as a result of regulation?)

I questioned Zuyus about the decision to use peer-to-peer loans in lieu of traditional banking and he cited the recent decline of credibility in the banking community, later saying “Peer to peer lending has become a trusted and viable alternative [to traditional lending], furthering economic growth until banks begin to lend more freely to small business again."

A company press release from June 8, 2009 quotes Zuyus as saying “Using these funds, we aim to expand our marketing and advertising efforts responsibly, quickly capitalizing on the current online dating boom.”

Getsteady.com was founded in 2009 to provide low-cost connections within the GLBT community. The company focuses on serious-minded friendships and relationships based on trust. Members must be verified including their profile photos (Zuyus cites ongoing troubles with users on dating sites supplying false photos).

Jessica Ward is a freelance writer based in the Seattle area. She writes on peer to peer finance, family and more. She also blogs at www.pennywisefamily.blogspot.com.

Zensah fuels growth with Lending Club loan

PLR has decided to profile Peer to Peer users on a regular basis. Our first such profile is the athletic-wear company Zensah, which was founded in January 2004 in Tel-Aviv, Israel.

Zensah is a privately held company which develops high-end performance clothing for runners, cyclists, tri-athletes and other serious athletes. They count among their customers MLB and NBA professionals. Their designs feature seamless technology. The name itself comes from the Italian word sensa meaning “without seams” to symbolize athletes without limits.

Zensah took out a loan for $12,250 at 10.59% with Lending Club to fund some growth. They were able to repay the money within six months, despite having been turned down for a conventional business loan by banks.

Ryan Oliver from Zensah says they learned about P2P lending from reading an article about the process, and found Lending Club very easy, and even says his loan was funded within a week. At the time of their Lending Club loan, they had also considered using Prosper.com, but he described the process as “too bureaucratic” and did not proceed with Prosper. He also says he would definitely recommend P2P borrowing for other companies looking to grow—he even says he wishes larger business loans were available—in the $100-$250,000 range.

I asked Ryan if P2P borrowing was part of a larger social media plan, and he replied that it isn’t now, but if they had a dedicated social media plan, it could be a component.

Jessica Ward is a freelance writer based in the Seattle area. Her work can also be seen at www.jessicaward.me

IOU Central Launching in USA

Note: IOU Central was not available for comment, due to the SEC’s “quiet period” though they have been contacted for comment.

Look out Lending Club, Pertuity Direct and Prosper, Canada’s IOU Central is on its way to America.

IOU Central filed a registration statement with the SEC on May 13th in which they seek to “register the offer and sale of up to $225,000,000 in aggregate principal amount of Borrower Payment Dependent Notes.” The notes are to be offered on a continuous basis following the effective date of the registration statement.

According to the company’s press release notes “will be issued in series and the proceeds from the sale of each series of notes will be designated by the registered lenders who purchased the series of notes to fund an unsecured consumer loan originated through the IOU Central loan marketplace to a registered borrower.”

IOU Central first made news by becoming the first p2p lending company in Canada in February 2008. They were only open a couple of weeks before they halted operations to 'resolve a regulatory matter'. We are still waiting for the first p2p lending company to open in Canada. Right now the most likely contender is CommunityLend.

IOU Central purchased a P2P lending startup from Denmark called Fairrates. Fairrates was built in 10 months by Arkadiusz Hajduk and opened in April 2007. They had lenders willing to invest but had a problem finding and vetting good borrowers. In Denmark there is no access to credit history and Fairrates was hit with a couple fraud cases.

After little success in Canada, IOU Central will try its luck in the United States. Prospective borrowers and lenders registering on the site receive the following email:

Thank you for your interest in IOU Central!

We are getting ready to release an online marketplace that will revolutionize peer-to-peer lending. Our platform will give borrowers the benefit of a true marketplace that allows for better interest rates. The platform will also give lenders freedom in lending with our real-time bidding system. We will keep you notified of our progress as we register with the Securities and Exchange Commission (SEC).

Thanks for being a part of the IOU Central revolution!

See you soon!
The entire IOU Central team

We love hearing from you, so if you ever have any comments,
questions, feedback, ideas, etc. please don't hesitate to email us at
feedback@ioucentral.com. We have a lot in the works, so visit ioucentral.com
often..

From company news and press releases it appears that IOU Central will have a slightly higher credit score requirement than Pertuity Direct and Lending Club—according to an article on wiseclerk.com, a Equifax score of 670 will be required. Lenders will pay a 1% servicing fee (the same as Lending Club). Borrowers will pay a 2% loan origination fee, and borrowers can request loans of up to $25,000 in two separate loans.

IOU Central is a peer-to-peer lending company. The company’s internet-based loan marketplace enables borrowers to post loan requests and purchase notes from lenders. IOU Central launched in Canada’s Peer to Peer lending space in February 2008, but stopped shortly thereafter due to regulatory conditions. IOU Central is headquartered in Kennesaw, Georgia in the United States.


Jessica Ward is a freelance writer and editor, based in Seattle, WA and writes in the personal finance and microfinance space. You can check out her other work at www.jessicaward.me.

Nuwire's Cost-Cutting Tips for Businesses: #1 Peer to peer lending

NuWire Investor just published an article titled Ten Cost-Cutters for Businesses. Here is their first tip:

Capital: Free money almost always comes with strings attached. But if you really need capital, here are some ways to get cash, for a limited time or a small fee:

• Peer-to-peer (P2P) lending is a way to find private lenders who will lend money in exchange for equity or some other security. Prosper.com is one source.
• Microlending groups offer business loans at very low rates. These are not exactly free, but they come close.

I agree that peer to peer lending is an attractive source of capital for some small businesses. I am not, however, aware of any peer to peer platform which requires an exchange of equity or some other security. Prosper, Pertuity Direct, and Lending Club only provide unsecured loans.

Although the article does not mention it, Prosper is actually closed right now while they register with the SEC.

Microlending typically refers to very small loans. With Grameen America, for example, the average loan size is $2,000. These are generally targeted to poor entrepreneurs, typically women, who do not have access to traditional credit markets. The upper limit on loans through most peer to peer lending site like Lending Club is $25,000.

While I'm pleased to see NuWire mention peer to peer lending, the information presented is a little inaccurate.

Pertuity Direct--Social Lending Meets Mutual Funds

Following my review of Pertuity Direct and Tom’s announcement of the official launch, PLR was contacted by the PR team at Pertuity Direct for an interview, and I was fortunate enough to talk with their management team including CEO Kim Muhota and Charlie Schliebs who is an independent board member for the National Retail Fund, which holds Pertuity’s funds. Also on the call was Lisa Lough, SVP of marketing for Pertuity, Inc.

As we mentioned before, this team has experience and credentials to spare, but their energy for their business model is also extraordinarily contagious. My prediction is that the combination of this energy, the security of their mutual fund-style of social lending and the precipitous failing of traditional lending is going to serve Pertuity well in the near future.

We’ve recently covered them, so I’ll keep this post short and focus on the new items that I’ve learned and a brief futuring discussion that I had with Kim and Charlie who indulged my interest in their version of what the future of social banking may hold.

For Lenders: Pertuity Direct is “social lending interval fund,” where lenders buy into a risk-classed pool of borrowers. Two pools are available now via the National Retail Fund for, but others are planned for the future. An advantage to the mutual fund approach is liquidity in your assets. You don’t have to wait a 3 year loan term to get your money back. One disadvantage is slightly higher maintenance fees, right now at about 3.17%. (I’m not sure how this offsets with the default rates in traditional P2P loans, so if anyone has thoughts on this, I’d love to hear them). Pertuity Direct requires a minimum investment of $250 USD, and you’ll experience a small fee if you withdraw before one year in the fund.

For borrowers there are several advantages. First, you don’t have to spill your financial guts or upload a glamour shot to get funded. Nobody will take your spelling into account in funding your loan (I’m guilty of this with my Lending Club account). Borrowing on Pertuity Direct doesn’t feel like running for Prom Queen in high school. You will know what interest rate and terms you’ll be offered and you can take it or leave it. Your loan will be approved or not, and funded within three days, just like a bank. The process is simple, familiar and respectful of your privacy.

Muhota has had a long time to stew on this plan. He first formed his idea seven years ago and has followed the trends. Plans for launch went on hold as they decided how best to comply with SEC regulations to ensure a secure product and legal compliance on all sides, and they launched PertuityDirect.com on January 22, 2009.

When I asked Kim Muhota and Charlie Schliebs about the prospects for long-term social finance, their energy level became even higher. They agreed that many people are loosing faith in traditional banking, and expecting more from their money. When I asked what the near future may hold for Pertuity, Muhota explained that they’re looking into shorter and longer term products for borrowers. I pressed further and asked if that might include “social” mortgages and revolving lines like credit cards. He replied “absolutely” elaborating that consumers and lenders alike are going to be drawn increasingly to the low overhead, lack of what he called “legacy costs” and the growing uncertainty of traditional banking.

I’d have to agree. Why have your money buying some Bank MBA’s Bentley when you could have it working for you in a high yield, responsibly managed product that comes equipped with all of the institutional rigors of a traditional banking product?

Special thanks to Pertuity Direct’s team for spending some time with me this week.

Jessica Ward is a freelance writer based in the Seattle area.

Lending Club opens to lenders from Virginia

Despite the regulatory troubles of all other p2p lending platforms (and perhaps partly because of it), Lending Club is doing very well. They are open for borrowers from all states and continues to add lending on a state-by-state basis. Today they added Virginia. Here is the latest map showing the states who are eligible to lend on Lending Club.

How might an Obama/Biden administration change p2p lending?

With the historic election of Senator Obama and Biden this week, the focus is now on what changes they will bring to the country. There are many proposed changes that might have an impact on peer to peer lending. According to change.gov, a site set up by the Obama-Biden Transition Project, "In the Illinois State Senate, Obama called attention to predatory lending issues. Obama sponsored legislation to combat predatory payday loans, and he also was credited with lobbying the state to more closely regulate some of the most egregious predatory lending practices."

While I do not believe Obama has ever specifically mentioned p2p lending, there are several of his economic proposals that are likely to impact the industry. Some of these proposals may influence the demand for loans or have other second and third order effects. Other changes may have a regulatory influence on the industry. Here are some of the specific proposals from change.gov:

Address Predatory Credit Card Practices

Obama and Biden will establish a five-star rating system so that every consumer knows the risk involved in every credit card. They also will establish a Credit Card Bill of Rights to stop credit card companies from exploiting consumers with unfair practices.

• Create a Credit Card Rating System to Improve Disclosure: Obama and Biden will create a credit card rating system, modeled on five-star systems used for other consumer products, to provide consumers an easily identifiable ranking of credit cards, based on the card's features. Credit card companies will be required to display the rating on all application and contract materials, enabling consumers to quickly understand all of the major provisions of a credit card without having to rely exclusively on fine print in lengthy documents.
• Establish a Credit Card Bill of Rights to Protect Consumers: Obama and Biden will create a Credit Card Bill of Rights to protect consumers. The Obama-Biden plan will:
  • Ban Unilateral Changes
  • Apply Interest Rate Increases Only to Future Debt
  • Prohibit Interest on Fees
  • Prohibit "Universal Defaults"
  • Require Prompt and Fair Crediting of Cardholder Payments

Reform Bankruptcy Laws

Obama and Biden will reform our bankruptcy laws to protect working people, ban executive bonuses for bankrupt companies, and require disclosure of all pension investments.

• Cap Outlandish Interest Rates on Payday Loans and Improve Disclosure: Obama and Biden will extend a 36 percent interest cap to all Americans. They will require lenders to provide clear and simplified information about loan fees, payments and penalties, which is why they'll require lenders to provide this information during the application process.
• Encourage Responsible Lending Institutions to Make Small Consumer Loans: Obama and Biden will encourage banks, credit unions and Community Development Financial Institutions to provide affordable short-term and small-dollar loans and to drive unscrupulous lenders out of business.
• Reform Bankruptcy Laws to Protect Families Facing a Medical Crisis: Obama and Biden will create an exemption in bankruptcy law for individuals who can prove they filed for bankruptcy because of medical expenses. This exemption will create a process that forgives the debt and lets the individuals get back on their feet.

Higher Education

• Create the American Opportunity Tax Credit: Obama and Biden will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students. Recipients of the credit will be required to conduct 100 hours of community service.
• Simplify the Application Process for Financial Aid: Obama and Biden will streamline the financial aid process by eliminating the current federal financial aid application and enabling families to apply simply by checking a box on their tax form, authorizing their tax information to be used, and eliminating the need for a separate application.

Will any of these proposals, if enacted, have an impact on the p2p lending marketplace? What do you think?

Media touts p2p lending - ignores upheaval

The Associated Press published an article yesterday - Peer-to-peer lending — Weighing benefits and risks. Although the article was published on October 20th, it seems like it was written at least a week ago. There is no mention of Prosper's lending halt. In fact, despite the quiet period, the author quotes Prosper's CEO. Here is an excerpt:

Getting loans through peer-to-peer lending isn’t as easy as you may think. These days, many have just as much trouble getting loans on Prosper.com as they might at a bank.

That’s because the lending site is getting a new wave of people with good credit who were turned away by banks, said Chris Larsen, the company’s CEO.

“So lenders are pickier about who they fund,” he said.

Only 5 percent of people with credit grades that fall in the bottom three brackets (out of seven) now get loans on the site, with about 40 percent of loans going to people with scores in the two highest brackets.

Maneo becomes first p2p lending platform in Japan

The past few days have been exciting for peer to peer lending - Loanio opened, Zopa closed, Lending Club emerged from their quiet period and Prosper halted lending. There is also big news overseas - Maneo launched the first peer to peer lending platform in Japan.


Over a year ago, Prosper announced plans to expand to Japan. There has been no news from Prosper since. Now that Prosper has entered a quiet period and is distracted with SEC regulations in the U.S., it is unlikely we will hear anything more about Prosper's planned expansion to Japan for some time.

Maneo is actually a play on the English words money and new. Maneo's CEO Tadatoshi Senoo said the platform has been in development since August 2006. Like the United States, Japan has extensive regulatory hurdles which had to be overcome.

Here are details about Maneo from their press release:

How to use maneo's social lending service

After initially registering as a member with maneo, borrowers and lenders can utilize maneo's social networking service. Registered members can easily and effectively communicate with other members utilizing "mane blog," "maneo message," and "mane tomo."

Creating an auction

People who want to borrow on maneo create loan listings explaining how much they desire, why they want to borrow and the maximum interest rate they are willing to pay lenders. Potential lenders select the loan listings they are interested in and bid on these loans. maneo connects borrowers with lenders through an auction process in which the lender willing to provide the lowest interest rate "wins" the borrower's loan.

Member requirements

Members must be between 20-65 years old and reside in Japan.

Borrower requirements

Borrowers must be between 20-60 years old and have annual income of at least 3 million yen. Borrowers must also successfully pass maneo's credit check and submit the following documentation: proof of identity and annual income.

Lender requirements

Lenders must be between 20-65 years old. Lenders must also successfully pass maneo's review process and submit proof of identity.

Need a p2p loan? Avoid Zopa

I have never considered the possibility I might be denied for a loan - yet it happened today. Only once in my life have I ever missed or been late on a payment (about four years ago I moved and the utility company didn't forward my last bill). I pay off my entire credit card balance every month. I have no debt except a home mortgage. My FICO score is over 700 and Prosper gives me a shiny AA rating.

On this blog I've largely neglected Zopa while writing much more about Prosper, Lending Club, Fynanz and Loanio. So, just for kicks I decided to go through the application process and write about obtaining a loan through Zopa. Imagine my suprise when I got this message.



"For Zopa to work, we can only arrange loans to folks with pretty good credit - a minimum FICO of 640, among other things."

What other things could they be talking about? According to the FAQ you need:

• a minimum credit score (FICO) of 640
• income of $2,000 per month
• and a few years of credit history

Well, I have more than $2,000 per month income and I've got more than a decade of credit history. What else could they want? I found some more requirements on this splash page:

• Miniumum FICO score of 640
• Minimum of 3 years of credit history with at least 5 accounts
• No recent bankruptcies or serious delinquencies
• Stable gross income of at least $2,000/month
• Borrowers utilizing less than 60% of the credit available to them are more likely to be approved for a Zopa loan and at a lower interest rate
• A debt service ratio/debt to income of less than 50% of gross monthly income

Hmmm...no problems with any of these requirements. I sent a note to customer service requesting specific information about why I was declined. I received a vague response, "Since you do have a score above 640 it looks like the application was declined for one of the other reasons." I followed up with a phone call and was told the borrower requirements have changed within the last 30 days.

An email to their media contact was returned undelieverable.

Fearing identity theft or something worse, I logged in and pulled up my credit report. Only one surprise. There is a new item on my credit report - a credit inquiry today for a loan. The only inquiry on my credit report at all. Unlike Prosper and Lending Club, Zopa pulls a "hard" request when you inquire about a loan. I should have read all of the FAQ throughly before requesting a loan. Here's what Zopa has to say about their "hard" inquiry:

"We think it's best if you assume that there will be an impact to your credit score. That means you should only get a quote if you really would be interested in a Zopa Loan."

I would add - you should only request a quote if you have perfect credit and don't mind a hard inquiry on your credit score even if you decide not to obtain a loan through Zopa. Try one of the other p2p lending platforms (like Lending Club) which do not pull a hard inquiry.

Loanio touts platinum verification and co-borrowers

After nearly a year of anticipation, Loanio's launch appears imminent. In a email to potential users last week, Loanio announced, "In just a couple of weeks (yes, we mean it this time!), we will be done with the final touches and ready to roll out!"

Loanio CEO Michael Solomon has let us peek under the hood and we have some exclusive screen shots.

Loanio homepage


Borrow on Loanio - Unlike other p2p lending sites, Loanio allows partial funding. As seen on borrower page (below), "If enough bids equal 100% of your loan, it automatically gets originated. If the bids equal more than 35%, but less than 100% of your loan, you can accept less or try again."

Lending on Loanio - As seen below, lending on Loanio is similar to other p2p lending sites. At FINOVATE, Solomon told the audience, ""We believe that the use of co-borrowing and plantinum listings will provide a greater amount of security and confidence to lenders."

Co-borrow on Loanio - Borrowers have the option to add a co-borrower to their loan. Co-borrowers must have a credit score higher than the other borrower on the loan and must have at least a E credit grade.

Platinum verification - For a small fee, borrowers can improve their odds of funding through platinum verification. Platinum verified borrowers will have the following checked by Loanio - photo ID, income, bank account, employer, address, homeownership.

Loanio credit grades - To borrow on Loanio you must have a credit grade of E or higher. Loanio has established a credit grade system from A+ to F or no score (NC). An E credit grade is equivilant of Experian VantageScore 569-603. With a F or NC credit grade score you must have a co-borrower to use Loanio.