Yes-Secure.com has begun operating a peer to peer lending business in the United Kingdom, similar to Lending Club and Prosper.com in the United States.
The company described its service in a recent press release, “YES-secure, an innovative P2P lending platform, allows multiple investors to bid on and fund a loan request. Investors can lend small amounts to borrowers ranging from grading A* to E based on their credit score retrieved from Callcredit and can expect to receive an interest rate dependent on their credit rating. Lenders can choose to lend to A* borrowers with a lower interest with minimal risk of defaults compared to E borrowers with a higher interest rate but a higher risk of defaults. Lenders can mitigate their risk by diversifying their portfolio and lending small amounts of around £10 to each borrower so that if one borrower defaults, the loss is minimised as the loss is shared among 50 to 100 lenders.”
The statement continued, “Similarly to eBay, borrowers can place a loan listing at YES-secure displaying not only their financial status but also pertinent information regarding their financial strengths and responsibilities as well as credit history. This allows lenders to make a value-judgement as to which listings suit their investment criteria. Interest rates are offered in eBay-style market bidding – if a lender asks for an interest rate which is too high, they will get outbid; hence interest rates are consumer regulated.”
The company boasted optimistic numbers about the rates of returns that its investors would make, claiming that investors could earn interest rates as high as 25%. The statement also predicted that default rates would likely between 2% and 5%, however, United States peer to peer lending investors learn that default rates are typically much higher. The company said that investors should expect to earn somewhere between 6% and 8% before taxes.
“Peer to peer lending has traditionally shown low defaults, much lower than the banks, as people are aware that they are borrowing from other people” said Dr Chandra Patni, founder of YES-secure.com.
