Peer-to-peer lending promises low interest loans

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VANCOUVER (NEWS1130) – It could be one of the cheapest ways to borrow money in Canada.

A business in Vancouver is offering you money at even lower rates than traditional lenders, like the big banks.

Grouplend founder and CEO, Kevin Sandhu says it’s able to offer lower rates by doing business online, and by using a “peer-to-peer lending” model.

“What it really means is ultimately we have investors on the back end who fund these loans directly. So, as a borrower, you deal with Grouplend, you have a loan with Grouplend, and we’re your customer service, and we manage that process entirely, but ultimately, we have groups of investors who fund the loans themselves. That helps us reduce the cost even further,” Sandhu says.

Grouplend connects borrowers with investors.

Sandhu adds the amount they’re able to undercut bank rates varies from customer to customer.

This kind of model has been picking up steam in the US, but Sandhu claims his business is the first in Canada to use it — Scott Hannah with the Credit Counselling Society thinks he may be right.

Hannah says it’s an interesting concept, adding when there is competition, the consumer usually benefits.

But, he advises to do your homework before applying for a loan.

“I would want to make sure that when I’m repaying the loans that accurate records are being maintained, and I’m sure they’re going to be in this case here, that this organization is properly licensed so that I know that it’s going to be around for the foreseeable future, that’s one of the challenges of new startups, you never know, and that’s why you have that safety and security with long-term establishments.”

Hannah adds with more people feeling comfortable doing things online, Grouplend has a chance at establishing itself.

He does have a couple of questions.

“What happens if interest rates go up? Certainly we’ve seen them go down for a number of years and stay down, but eventually they’re going to go up and if I was a borrower, I would want to make sure that when I take out a sum of money at a certain interest rate, it’s not going to be subject to review if interest rates go up in the relatively near future.”

Scott would also want to know whether there are any provisions if he had difficulty with payment — what provisions there are to revisit terms of the loan.

“If marketed properly, it’s a win for consumers because we’ll be able to take out obligations when we need them at a lower rate, and competition is good.”

He adds there are a lot of trends in financial services right now.

Noting constant changes in technology, he thinks we’ll see more of these kinds of innovative services and products down the road.

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