P2P Lending With Cars as Collateral

German p2p lending service Auxmoney.com has introduced a new feature this week. Borrowers can now offer a car as collateral for a p2p loan.

The user pays a fee of 9.95 Euro to document this in his loan listing. Pictures of the car, the model and the mileage and the estimated price a car dealer would pay for car are displayed in the listing. In this example listing, the borrower puts up his BMW as collateral. The estimated value covers 101% of the loan amount requested. In general the car can cover any percentage of the loan amount – it does not need to cover the full amount. Furthermore there is information on the type of insurance coverage.

If the loan is funded, then a contract defines the terms of the assignment as security. The borrower continues to drive the car (obviously he is not allowed to sell it without the consent of Auxmoney), but needs to deposit the certificate of ownership (motor vehicle registration certificate) at Auxmoney. This arrangement costs the borrower 2 Euro per month.

Should the borrower fail to repay the loan, then Auxmoney has the right to sell the car.

While a car as collateral does in not provide fail-safe security (many things can happen), it will be probably perceived by lenders as one feature for higher security against defaults.

The Wiseclerk Auxmoney stats page will in future track the performance of p2p loans secured by cars.

This is a first for p2p lending – but soon another p2p lending service will follow. Pärtel Tomberg, CEO of Estonian p2p lending service Isepankur told P2P-Banking.com earlier this month, that Isepankur will introduce cars and real estate as collateral for p2p loans in the second half of 2010.

(Photo by pedrosimoes7)

B2B Loans Introduced at Isepankur

IsePankur, the Estonian P2P banking site, this recently added three innovations to their platform:

  1. Loan auctions that end immediately when the loan request is 100 percent funded
  2. Business accounts enabling Business-to-Business, Consumer-to-Business and Business-to-Consumer lending and borrowing
  3. An arbitrage court that will be in charge of solving disagreements coming from the loans, incl. defaulting loans

isePankur decided to add a new auction type based on requests from the borrowers that allows the borrower to choose if the auctions ends after a set time period or when its fulfilled 100 per cent. The borrowers currently have an alternative to borrow from banks, pay-day loan companies or isePankur. The two former institutions provide the loan to the customer with-in 1 to 3 days from the application. Hence some of customers asked to implement a system by which they would be able to choose between a quick financing or a low interest rate in order for them to be more willing to use the peer-to-peer platform.

isePankur also launched an important new feature allowing legal entities to register, lend and borrow on the site. The maximum loan amounts (only for companies) have been increased to 150,000 EEK (approx. 13,175 US$), approx 15 times higher than the loan limit for individuals. There were three major reasons for the addition: (a) small companies lack financing opportunities as the banks have stopped providing credit whilst there are no official debt markets in Estonia; (b) companies with excess funds do not have simple investment opportunities that would provide them with returns of over 3-4 per cent per annum; and (c) there is a 0 per cent corporate tax in Estonia hence most of individuals with excess capital keep it in their companies’ accounts. isePankur aims to increase the loan volumes on the site multi-fold after the public and companies have had enough time to get familiar with the benefits provided by the business services.

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Sobralaen renamed Isepankur

Only 6 weeks after the launch, Estonian p2p lending service Sobralaen.ee was renamed into IsePankur.ee (translates to iBanker). The reasons were that “The previous name only represented one side of the business (borrowing) and [that] it had negative associations with payday loan companies who have destroyed the term ‘loan’ in Estonia over the past 2-3 years”, co-founder Pärtel Tomberg told P2P-Banking.com.

Since the launch 44 loans with a value of 81,200 EEK (approx. 7,000 US$) were founded. The current average interest rate is 25.3% which matches bank interest rates for similar loans.

Following requests by lenders, Isepankur allows borrowers to reveal their identity (full name and personal identity code) in their auctions. Clicking on the name or the identity code runs an automatic query at Google.