Monday, March 31, 2008

Guarantees for Lenders, More Bids for Borrowers

A word about guarantees…

Unlike some other people-to-people lending sites you may be familiar with, we treat lenders differently. At Fynanz, we will guarantee a portion of the amount that is lent. If you read the posts below, you already know about FACS grading. The higher the FACS grade, the more of the original amount lent we will guarantee, up to 100% for our Platinum Honors grade.

The idea here is twofold. 1.) We directly address the primary concern of anyone who has ever lent money on a people-to-people site by making sure that at least a portion of a lenders initial outlay is protected. 2.) As veterans of the student loan industry, we have enough confidence in our FACS grading to guarantee up to 100% of any amount lent at our Platinum Honors level. Check out the chart below for more detail:

Additionally, unlike some other people-to-people lending sites, lenders are not responsible for paying collection fees on those loans that are delinquent but not in default. These will be paid for by our Default Prevention and Guarantee fund that has been capitalized by Fynanz and will be continuously funded by a 1% rate addition added for each borrower. Even with this rate addition, most borrowers will find that their rates are very competitive with traditional private student lenders. Borrowers are also eligible to have this 1% rate addition removed as soon as 10% of the principal balance has been repaid.

Neal Coxworth
Director of Marketplace development

Tuesday, March 25, 2008

Interest Rates & The Student Loan Industry

On this post I’d like to address a couple of the questions we have received since launching the Fynanz website.

First, a few people have asked, “Will lenders be adequately compensated given the recent interest rate cuts by the Federal Reserve?” The concern is interest rates have declined to a level where the rates borrowers are required to pay for their student loans will not be enough to attract lenders to loan money.

Before I answer this question, it is important to first mention that our private student loan, which we call the OpenLoan, has a variable interest rate. This means the interest rate charged to borrowers will change depending on fluctuations in market interest rates.

It is also important to remember that the Federal Reserve rate cuts have broad implications across the financial markets, including the lowering of interest rates banks are willing to pay for depository products such as savings accounts and certificates of deposit. Therefore, the interest rates offered on the Fynanz OpenLoan will be attractive when compared to traditional bank products.

Below is a link to an average of the rates banks are paying on CD’s nationwide.

Unlike a bank, Fynanz loans do not carry any type of government guarantee, but they do carry a guarantee of up to 100% of the amount lent, depending on the FACS Grade of the loan to be paid from our guarantee fund (please see earlier post). Therefore, lenders will be able to earn an attractive rate of return coupled with a degree of safety that they are comfortable with.

The second question I would like to address, “If the interest rates earned by lenders are too high, why would borrowers use Fynanz instead of a traditional bank?”

Even though the Federal Reserve has recently cut interest rates, traditional lenders will likely not pass along much, if any, of this rate decrease to consumers. Banks remain very nervous given the current housing crises and the difficulty in the credit markets. Most traditional lenders have suffered substantial losses in other types of consumer lending businesses (mostly mortgage related) and remain very concerned with the financial health of consumers and consumer lending. Many lenders are currently in the process of tightening underwriting standards and reducing risk exposure. Therefore, the rates charged to consumers will likely continue to remain relatively unchanged even with the recent rate cuts by the Federal Reserve.

Below is a link to national averages for consumer credit cards:

The current market environment should present a very unique opportunity for Fynanz to execute its vision of providing an alternative private student loan financing option to students. Demand for educational financing is at an all time high and is expected to only rise as the costs of education continue to increase. The current credit crises has put a damper on the ability of many of the traditional private student lenders to lend. Some lenders have been forced out of business, and others are operating in difficult conditions due to a lack of available liquidity. Simply stated, lower interest rates as a result of the recent Federal Reserve rate cuts have not yet translated into lower lending rates for consumers.

Link to article regarding Sallie Mae scaling back Federal & Private Student lending

Fynanz is opening up a new avenue for borrowers to finance their education by putting control back into the hands of students, while providing lenders in search of attractive returns a way to put their money to work for a great cause.

Hopefully this addresses some of the questions.

Feel free to let us know of any comments.

Neal Coxworth
Director of Marketplace Development

Thursday, March 20, 2008

Fynanz Debut!

Hello all,

Welcome to the Fynanz Blog, where we discuss things related to higher education, P2P lending and hopefully answer any questions you may have about Fynanz and our private student loan for higher education, the OpenLoan.

Fynanz is the first People-to-People lending site designed especially for college students. Right now, borrowers must be residents of Florida and New York though they may attend an eligible school in any state. Lenders may reside in any state. Keep any eye out for more states and schools as we continue to expand. Some interesting points about the Fynanz OpenLoan:

1. Borrowers can set their own rates and the amount they wish to borrow. Lenders bid on funding the loan in a competitive auction process. This helps keep rates low. Borrowers can enlist family, friends and alumni from their school to bid on their loans. Keep in mind friends and family have priority in the bidding process, so this will also help keep rates reasonable.

2. When looking at a borrower, Fynanz not does not only consider the credit of a borrower or cosigner, but also the student's academic criteria. By combining these two, we come up with FACS, or Fynanz Academic Credit Score, our proprietary underwriting system to predict likelihood of borrower default on a loan. Each loan application is assigned a FACS grade, and this helps lenders determine what level of risk they are comfortable with and the level of return they would like on any money lent. Cosigners are encouraged for borrowers who do not have two years of job history or verifiable income.

3. Fynanz also guarantees loans up to 100% of the amount lent, helping give lenders greater security and enabling them to bid on more loans for borrowers. Lenders can bid as little as $50 to get started.

Feel free to check out the site, or shoot any questions you might have my way. That's why we are here! You can also email us at

Neal Coxworth
Director of Marketplace Development