Squirrel Money to launch true Peer-to-Peer Lending

New Zealand’s leading challenger in the mortgage broking market, Squirrel, has been licensed by the Financial Markets Authority to launch a peer to peer (P2P) lending service.

Squirrel Money will focus on offering both secured and unsecured personal loans of up to $70,000.

Squirrel Managing Director John Bolton says Squirrel Money will be the first authentic person-to-person service offered in New Zealand.

“Squirrel Money will connect borrowers and lenders together. Unlike other P2P offerings in the market, we aren’t funded by a bank to deliver a bank-style offering. All our loans will be genuine ‘person to person’ loans.”

Bolton says Squirrel will look for investors who are keen to make a healthy return on their money, who are increasingly frustrated by the low rate of return they get from traditional bank rates.

“Investors typically are offered very low rates of return for their money, and with the economy the way it is there’s little sign of the banking industry increasing those rates. We can offer a higher rate of return and with a flat fee structure, any returns aren’t eaten up by hidden costs.”

Borrowing rates are determined by an auction type bidding process. The more investors that join in an auction, the lower the rates on offer and vice versa.

Squirrel Money will charge a flat fee rather than taking a percentage-based approach. Unsecured loans will cost $250 and secured loans $500.

“We believe this approach will be far more transparent for borrowers and investors alike.”

Squirrel Money protects investors’ money through its reserve fund – called Loan Shield – also a first for the New Zealand P2P market.

“We put aside part of a borrower’s interest payment into Loan Shield to cover unexpected credit losses. It means investors don’t have to spread their money over a number of loans and don’t have to assess the credit risk of every loan they invest in.”

Squirrel Money will launch in the market in early September.

“Our intention is to drive down borrowing costs whilst maintaining high credit quality standards. We want to stay true to the ethos of person-to-person lending and social entrepreneurship and if international experience is anything to go by, this is an exciting time to be in the P2P space,” says Bolton.