Today CommunityLend launched it’s peer-to-peer lending service in Canada. The service currently is available to residents of Ontario. Borrowers can use CommunityLend as an alternative loan source to bank loans or credit cards with the ability to set the desired interest rate themselves (CommunityLend sets minimum rates). Loan amounts range from 1,000 to 25,000 CAN$ for a loan duration of 36 months. CommunityLend is open for borrowers with a good credit rating (AA to C), which encompasses about 70% of the population.
The borrower has the option to define whether there will be an auction (competitive bidding) once the loan amount is funded, possibly getting him the advantage that the interest rate will be lowered during the auction time with lenders underbidding each other.
Due to regulation restrictions only lenders qualifying as “accredited investors” are allowed to participate as lenders. The minimum investment is 100 CAN$. Bids can be in multiples of 100 CAN$.
CommunityLend provides lenders information about borrowers to help them make decisions about lending, including; the credit categorization of the borrowers on the site (credit rating) , their assessed debt burden ( affordability rating), their assessed stability (stability rating).
CommunityLend actively steers lenders towards diversification with the rule that a lender can only bid a maximum of 10% of the amount of an individual loan and the bid maybe not more than 10% of his total overall investment.
Registration to the service is free. Borrowers pay closing fees of 1 to 2.5% percent of the loan amount depending on credit grade (minimum 75 CAN$) upon payout of the loan. Lenders pay 1% p.a. fee on the outstanding loan principal.
CommunityLend uses credit bureau data and bank account data to verify borrower identity.
The following video gives an introduction to CommunityLend:
I like the cheerful style of the website. All information is presented in an easy to navigate and easy to understand way.
I am curious to know how CommunityLend can position itself as a P2P player when the first P hardly fits the common definition of Peer or Person if it must be an Accredited Investor. Is this not somewhat misleading?
While AI2P is a bit much P2P seems to imply CommunityLend is something that is isn’t. Can you think of an Accredited Investor that would advertise as being a P?
I think you meant CommunityLend, not Lending Club 😉
Interesting that they’ll require a minimum of 10 bidders for each loan, that might take some work since only accredited investors can bid. Weren’t they going to have higher limits for institutional lenders?
Thanks Dan, have corrected that mistake.
The diversification requirement is not applicable for lenders falling into the category “Institutional lenders”.
See
https://www.communitylend.com/public/faq#50
but applies to both other categories. Knew that but did not want to overcomplicate the matter when writing the article
These comments and points are accurate. Peer-to-peer lending has certainly evolved to a significant degree since the early days of 2005. There has been a narrowing of focus to align the services with the realities of economics and of the needs of the governing securities industry, which are designed to protect investors through consistent application of risk methodologies and liberal disclosure of risk. Given the nascence of peer-to-peer lending, it will be AI and Institutional at first, but as we gain traction in the market this too may well evolve.
With regard to the market category, peer-to-peer, we at CommunityLend are comfortable with that given our anticipated base of active personal AI’s but also our community area, that will become more apparent over time and with volume.