It’s a new way of borrowing money, but is it a good option?

Your mortgage broker should be able to provide advice on peer to peer lending, and explain how it compares to bank and non-banks or finance companies.

Banks are controlled by rules and regulation and therefore will often decline loan applications for reasons that seem to make no common sense.

What Is Peer To Peer Lending?

Peer to peer lending is as simple as matching people who want money with people who have money.

A peer to peer business like LendMe is really just a marketplace that links those people. LendMe assess a loan application and based on the type of lending, the security available and the borrowers profile will set an interest rates based on the deemed risk to the investor.

This is a video that explains what peer to peer lending is, and how it works.

The other peer to peer lenders work in the same way.

Who Provides Peer To Peer Lending In New Zealand?

Currently in New Zealand there are just four providers who have been issued a license by the Financial Markets Authority (FMA) but they are not all trading yet.

Of course, the concept of peer to peer lending is just starting in New Zealand and we would therefore expect a few more options to emerge

over time, but the market is limited and the key think is to know that we have options for all types of borrowers – and we are getting there.

They Have Targeted Different Markets

We all want to have choice and peer to peer lending is just another choice of lenders; however it is also important to understand the types of business that each of these lenders are looking for.

Harmoney – they concentrate on smaller personal loan of up to $35,000. Most of the lending that they do is debt consolidation but they also provide loans for home improvements, travel, weddings, vehicles and household items. This is a total online application process and while mortgage brokers recommend Harmoney they cannot process the application for you.

LendMe – officially they have not launched yet; however some mortgage brokers have access already. They are targeting larger fully secured lending only with loans from $25,000 up to $2million and interest rates as low as 6% and up to about 15%. The types of lending they are focused on is property lending (residential, commercial and rural), business finance and vehicle and equipment finance. Although they have a website, the easiest way to access LendMe is through a mortgage adviser.

Squirrel Money – they have not yet started lending, but must be about to. The website says they will lend up to $70,000 on both secured and unsecured loans with interest rates targeted at being 9% – 12% but hope to be able to offer lower rates too.

Lending Crowd – they have also not started lending yet, but they plan to facilitate loans of between $2,000 – $200,000 targeting secured personal loans, vehicle loans and loans to small business. Interest rates are expected to start as low as 8% but could go as high as 19% which is similar to current personal loan and credit card rates offered by the banks. CLICK HERE to go to the Lending Crowd website.

No doubt there will be more peer to peer lenders in time, but at the moment these have covered a wide range of the types of lending done in New Zealand.

Should You Use A Mortgage Adviser?

They key to getting an approval with any peer to peer lender is to make the application look attractive so it will be presented to funders / lenders (other kiwis) who will be happy to provide funding for you.

It is also important to understand what all your options are. While peer to peer lending sounds attractive it is certainly not always going to be a good option and often a mortgage broker is able to source cheaper or more appropriate finance for you.

Your mortgage adviser should be able to provide details on peer to peer lending, and explain how it compares to banks and non-banks or finance companies.

This is the expertise that a mortgage adviser can provide.

We welcome your contact to discuss peer to peer lending.

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