Comments on: New Peer-to-peer Lender for Student Loans http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/ A blog about personal finances, peer-to-peer lending, investing, the economy, and more. Fri, 05 Sep 2008 16:17:39 +0000 http://wordpress.org/?v=2.6.1 By: Another P2P Student Lender | WealthBoy http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-246 Another P2P Student Lender | WealthBoy Mon, 02 Jun 2008 18:22:55 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-246 [...] about a new p2p student lending site called GreenNote. In addition to facing many of the same challenges that await Fynanz, GreenNote will have additional obstacles to overcome in order to attract investors. Perhaps the [...] [...] about a new p2p student lending site called GreenNote. In addition to facing many of the same challenges that await Fynanz, GreenNote will have additional obstacles to overcome in order to attract investors. Perhaps the [...]

]]> By: WealthBoy http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-206 WealthBoy Sun, 13 Apr 2008 18:00:21 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-206 You're right, the borrower's rate will be adjusted as the LIBOR moves. I'm not sure what I was thinking. I believe the margin would always remain the same for the lenders though. Similar to how home equity lines of credit are usually tied to WSJ Prime plus some number. The "plus some number" always remains the same, but the underlying rate will adjust along with the WSJ Prime rate. You’re right, the borrower’s rate will be adjusted as the LIBOR moves. I’m not sure what I was thinking. I believe the margin would always remain the same for the lenders though. Similar to how home equity lines of credit are usually tied to WSJ Prime plus some number. The “plus some number” always remains the same, but the underlying rate will adjust along with the WSJ Prime rate.

]]> By: WealthBoy http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-677 WealthBoy Sun, 13 Apr 2008 18:00:21 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-677 You're right, the borrower's rate will be adjusted as the LIBOR moves. I'm not sure what I was thinking. I believe the margin would always remain the same for the lenders though. Similar to how home equity lines of credit are usually tied to WSJ Prime plus some number. The "plus some number" always remains the same, but the underlying rate will adjust along with the WSJ Prime rate. You're right, the borrower's rate will be adjusted as the LIBOR moves. I'm not sure what I was thinking. I believe the margin would always remain the same for the lenders though. Similar to how home equity lines of credit are usually tied to WSJ Prime plus some number. The “plus some number” always remains the same, but the underlying rate will adjust along with the WSJ Prime rate.

]]> By: Chrisfs http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-205 Chrisfs Sun, 13 Apr 2008 16:35:40 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-205 How would it result in a negative interest rate? The margin is either a positive number or zero, and it gets added to the Libor not subtracted, so you will always get a positive result. You will never get a negative interest, but you will get an interest that goes up and down through out the life of the loan. The blog Prosper Lending Review seems to see it the same way. http://prosperlending.blogspot.com/2008/03/fynanz-first-p2p-student-loan.html I'll call them Monday and get it from the horse's mouth. How would it result in a negative interest rate?
The margin is either a positive number or zero, and it gets added to the Libor not subtracted, so you will always get a positive result. You will never get a negative interest, but you will get an interest that goes up and down through out the life of the loan. The blog Prosper Lending Review seems to see it the same way.
http://prosperlending.blogspot.com/2008/03/fynanz-first-p2p-student-loan.html

I’ll call them Monday and get it from the horse’s mouth.

]]> By: Chrisfs http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-676 Chrisfs Sun, 13 Apr 2008 16:35:40 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-676 How would it result in a negative interest rate? <br>The margin is either a positive number or zero, and it gets added to the Libor not subtracted, so you will always get a positive result. You will never get a negative interest, but you will get an interest that goes up and down through out the life of the loan. The blog Prosper Lending Review seems to see it the same way. <br><a href="http://prosperlending.blogspot.com/2008/03/fynanz-first-p2p-student-loan.html">http://prosperlending.blogspot.com/2008/03/fyna...</a><br><br>I'll call them Monday and get it from the horse's mouth. How would it result in a negative interest rate?
The margin is either a positive number or zero, and it gets added to the Libor not subtracted, so you will always get a positive result. You will never get a negative interest, but you will get an interest that goes up and down through out the life of the loan. The blog Prosper Lending Review seems to see it the same way.
http://prosperlending.blogspot.com/2008/03/fyna...

I'll call them Monday and get it from the horse's mouth.

]]> By: WealthBoy http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-204 WealthBoy Sun, 13 Apr 2008 15:06:10 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-204 The total rate that the borrower is charged would be 1-Month LIBOR + investor margin + guarantee fee. For instance, if the 1-Month LIBOR is 2.72%, the investors bid the margin down to 8%, and the guarantee fee is 1%, the total interest rate the borrower pays is 11.72%. I don't think it can work the way you mentioned, because if the LIBOR were to go up high enough and investors bid the margin low enough, it would result in a negative interest rate for the investors. The guarantee fee works somewhat similar to PMI on mortgages. Once the borrower has enough equity in the loan (10%), they will no longer need to pay the fee. The guarantee fees are collected into a pool of funds just like insurance premiums, and the funds will be used to pay claims as defaults occur. The total rate that the borrower is charged would be 1-Month LIBOR + investor margin + guarantee fee. For instance, if the 1-Month LIBOR is 2.72%, the investors bid the margin down to 8%, and the guarantee fee is 1%, the total interest rate the borrower pays is 11.72%. I don’t think it can work the way you mentioned, because if the LIBOR were to go up high enough and investors bid the margin low enough, it would result in a negative interest rate for the investors.

The guarantee fee works somewhat similar to PMI on mortgages. Once the borrower has enough equity in the loan (10%), they will no longer need to pay the fee. The guarantee fees are collected into a pool of funds just like insurance premiums, and the funds will be used to pay claims as defaults occur.

]]> By: WealthBoy http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-675 WealthBoy Sun, 13 Apr 2008 15:06:10 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-675 The total rate that the borrower is charged would be 1-Month LIBOR + investor margin + guarantee fee. For instance, if the 1-Month LIBOR is 2.72%, the investors bid the margin down to 8%, and the guarantee fee is 1%, the total interest rate the borrower pays is 11.72%. I don't think it can work the way you mentioned, because if the LIBOR were to go up high enough and investors bid the margin low enough, it would result in a negative interest rate for the investors.<br><br>The guarantee fee works somewhat similar to PMI on mortgages. Once the borrower has enough equity in the loan (10%), they will no longer need to pay the fee. The guarantee fees are collected into a pool of funds just like insurance premiums, and the funds will be used to pay claims as defaults occur. The total rate that the borrower is charged would be 1-Month LIBOR + investor margin + guarantee fee. For instance, if the 1-Month LIBOR is 2.72%, the investors bid the margin down to 8%, and the guarantee fee is 1%, the total interest rate the borrower pays is 11.72%. I don't think it can work the way you mentioned, because if the LIBOR were to go up high enough and investors bid the margin low enough, it would result in a negative interest rate for the investors.

The guarantee fee works somewhat similar to PMI on mortgages. Once the borrower has enough equity in the loan (10%), they will no longer need to pay the fee. The guarantee fees are collected into a pool of funds just like insurance premiums, and the funds will be used to pay claims as defaults occur.

]]> By: Chrisfs http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-203 Chrisfs Sun, 13 Apr 2008 08:45:22 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-203 "My guess would be that as the LIBOR is adjusted up and down, the margin remains the same and the rates the investors receive remain the same as well." I don't quite understand your meaning. If the Libor changes and the margin remains the same, the rate the lender is getting has to change. I took it to mean that the margin is what is bid down during the bidding process, but when the loan is made, it remains fixed and the rate the lender receives changes as the base rate (the Libor) changes. In this way, it would act very much like a credit card or variable rate mortgage. http://www.fynanz.com/help/faq/fynanz#q4 “My guess would be that as the LIBOR is adjusted up and down, the margin remains the same and the rates the investors receive remain the same as well.”
I don’t quite understand your meaning. If the Libor changes and the margin remains the same, the rate the lender is getting has to change.

I took it to mean that the margin is what is bid down during the bidding process, but when the loan is made, it remains fixed and the rate the lender receives changes as the base rate (the Libor) changes. In this way, it would act very much like a credit card or variable rate mortgage.
http://www.fynanz.com/help/faq/fynanz#q4

]]> By: Chrisfs http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-674 Chrisfs Sun, 13 Apr 2008 08:45:22 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-674 "My guess would be that as the LIBOR is adjusted up and down, the margin remains the same and the rates the investors receive remain the same as well."<br>I don't quite understand your meaning. If the Libor changes and the margin remains the same, the rate the lender is getting has to change. <br><br> I took it to mean that the margin is what is bid down during the bidding process, but when the loan is made, it remains fixed and the rate the lender receives changes as the base rate (the Libor) changes. In this way, it would act very much like a credit card or variable rate mortgage. <br><a href="http://www.fynanz.com/help/faq/fynanz#q4">http://www.fynanz.com/help/faq/fynanz#q4</a> “My guess would be that as the LIBOR is adjusted up and down, the margin remains the same and the rates the investors receive remain the same as well.”
I don't quite understand your meaning. If the Libor changes and the margin remains the same, the rate the lender is getting has to change.

I took it to mean that the margin is what is bid down during the bidding process, but when the loan is made, it remains fixed and the rate the lender receives changes as the base rate (the Libor) changes. In this way, it would act very much like a credit card or variable rate mortgage.
http://www.fynanz.com/help/faq/fynanz#q4

]]> By: WealthBoy http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-201 WealthBoy Sun, 13 Apr 2008 02:58:06 +0000 http://wealthboy.com/new-peer-to-peer-lender-for-student-loans/#comment-201 Chrisfs: It seems that the interest rate has two components, the base rate and the margin. As you said, the base rate is based on LIBOR and the investors bid on the margin. My guess would be that as the LIBOR is adjusted up and down, the margin remains the same and the rates the investors receive remain the same as well. The loans will have to strike a careful balance in order to remain competitive for borrowers as well as provide enough return for investors. Chrisfs:

It seems that the interest rate has two components, the base rate and the margin. As you said, the base rate is based on LIBOR and the investors bid on the margin. My guess would be that as the LIBOR is adjusted up and down, the margin remains the same and the rates the investors receive remain the same as well. The loans will have to strike a careful balance in order to remain competitive for borrowers as well as provide enough return for investors.

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