P2P Lending Startup Comes With Crowdfunding Touch

A new P2P lending startup officially launched into the market yesterday (April 7) to bring an alternative financing option to consumers looking to borrow at a lower rate — and to do so in a manner that has the ability to potentially reduce the risk to the lender, TechCrunch reported.

What’s the secret? That startup, WeFinance uses the power of crowdfunding with a little bit of technology to bring about a new lending scheme that gives consumers the chance to have their loans backed by real people who are looking to help those needing a way to secure funding for a loan. It calls itself the “platform for low-risk borrowers to crowdfund loans.”

Much like a Kickstarter campaign, WeFinance taps into a crowdfunding model to enable borrowers to pitch online why they are seeking a loan, their means to pay it back and why they are a worthy candidate for lenders to back, or “pledge.” The service is aimed at those looking for help to pay back debt accumulated through student loans and other similar types of expenses. It also allows borrowers to get endorsements about their reliability, which can help reduce interest rates and spark more lenders to back them.

WeFinance launched its first public batch of lenders to back yesterday and posted this message on its blog; “We’re excited to announce our public launch with our largest batch to date, consisting of 15 borrowers ranging from college, JD, and MBA grads refinancing student loans, to coding bootcamp admits seeking funding for living expenses.”

Of the initial batch of 15 borrowers, it totals $200,000 in potential funding that is all focused on student loan refinancing.

Here’s how WeFinance works in terms of those backing the loan: Lenders pledge a specific amount to a loan candidate on the site, and after the terms of the loan are paid off, the lender gets their money automatically put back in their account. From the lender’s perspective, it’s like having a savings account — but with a better cause since it helps those who need help securing low-interest loans. Lenders also have the chance to get back a return on their investment by receiving a small percentage back. Interest rates for the borrowers start at 4 percent and the service is currently free to both lenders and borrowers.

The company, founded by CEO Eric Mayefsky, was born out of the idea of lending friends money in order to help them avoid paying off high interest rates. Relying on a “pay back in good faith” type of loan system, it sparked the idea for the next new thing in alternative lending. That’s where WeFinance came to fill the gap, particularly for young lenders that may not have had the chance to build their credit up yet. Being young, or without credit, the founder said, doesn’t mean they won’t be good at paying back the loans.

“They had very little credit history,” Mayefsky said in an interview. “They had good jobs in their past or they had good jobs lined up. In my perspective, they were very low risk.”

While most loan programs don’t give the borrower much leeway to set their terms, WeFinance allows the borrower to set the limit of what lenders can offer and they set how they will pay back. The idea behind WeFinance is also to have the borrowers be able to tap in their own friends and family into backing their financing, but it also widens the lender net to the general public. According to the company, loans typically range between $10,000-$20,000 but can be as low as $1,000.