People Capital: The way education finance should work

Review posted Tue 27 Sep '11
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As an investor looking to perhaps diversify your portfolio you might want to consider Peer to Peer lending with the beneficiaries being worthy students!

People Capital provides a platform for students to obtain unsecured private loans for 2-15 year terms subject to certain criteria being met. Lenders purchase the loans, or parts of them, by way of loan notes from People Capital who retain the rights and responsibilities associated with the servicing and collection of them.

The mechanics are similar to other P2P platforms. Qualifying students have their loans listed and graded from a risk perspective and pay an application fee and an origination fee. Lenders register, deposit a cash sum into their People Capital account and then search for opportunities that suit the level of risk they’re willing to take and decide how much of the loan they’re happy to fund.

This of course could be the whole amount but must be at least $1,000 and the whole process follows an auction format. Borrowers will have set out the maximum interest rate they are willing to pay and lenders will then bid the figure down in an effort to secure a deal. If a number of separate bids make up the total loan then the highest of the interest rates bid will apply.

Lenders must be accredited investors as set out in the relevant section of the Securities Act 1933 and will be charged a monthly servicing fee. Loan repayments are collected by People Capital and paid directly into the relevant lending account. It should be noted that the cash held in the lending account is not interest bearing.

Funding student loans presents a fairly seasonal investment opportunity directly driven by the school year and so timing is everything.

This looks like a P2P site with all the boxes ticked and where investors can get a decent return.

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