Fynanz.com – An Initial Review

After receiving word on Fynanz.com, I decided to see what all the buzz is about. Fynanz.com is a peer 2 peer lending site providing private student loans.

The funded loans are sent to the student by check payable to both the student and the schools which they attend. This means the students will have to bring the check to their school which the school deposits.

The students are rated using a FACS score which Fynanz claims is based on credit profiles of cosigner and student (if available), GPA, year in school, school attending and course of study. They also claim that credit scores under 640 will not be funded.

The site itself is streamline and easy to use. The sign up process was simple, fast and secure. Funds are transferred via a checking account which was a breeze to setup and verify. The verification process took three days.

Also, Fynanz offers an initial $500 of “lending power” which allows you to bid on loans prior to having funds in your account. The catch is that you must deposit funds into your account matching the initial bid prior to five days before the close of the loan. This gives new lending accounts a way to bid prior to account verification and also allows lenders to keep unused funds out of their account which is not earning interest.

The accounts are guaranteed based on the students FACS score. The loans can be guaranteed up to 100%. The loans I looked at ranged from 70% to 90% guarantee. This means that if the student defaults on the loan, Fynanz.com will repay up to 100% of the loan back to the lender. They claim they can do this based on a 1% lenders fee they charge that is deposited into the guarantee fund.

The students have the option to borrow with deferred payments or interest paid. If interest paid, lenders will see regular monthly payments with interest. If deferred, the lender will see an immediate $25/ month good faith payment and then regular payments sixth months after graduation.

Here are a few problems I noticed:
1 – No borrowers!! In fact as of 11/19/2008 there is a total of SIX borrowers.
2 – These are long term loans – there is no sale of the note for the initial year and only a possibility of option to sell the note later.. but no promise according to Fynanz.com
3 – With so little borrowers I do not see the “guaranteed fund” to be fully capable of repaying defaulted loans.
4 – There are many states that Fynanz.com is not currently licensed with.. they claim they will be adding more with time. Here’s a link to the states they are currently able to do business with – http://www.fynanz.com/help/state_licenses
5 – Low interest rates to lenders compared to other P2P lending sites.
6 – High interest rates for borrowers compared to other student loan options. Fynanz.com warns borrowers that government loans are more beneficial. “Borrowers: Before considering an OpenLoan, please exhaust federal loans, which in most cases will cost less.”

Pros noticed:
1. Easy to use website
2. Fast application process
3. A great idea allowing lenders to invest in a students future (kind of a good feeling)
4. Initial “Lending Power” a great way to speed up the lending process
5. A feeling of security knowing the students must bring the loan to their schools to be fully utilized
6. No minimum initial deposit
7. Guarantees for the lenders (if this holds up)

Overall Fynanz.com is a fun new idea which has a lot of potential. It is relatively new and needs more borrowers. If it can get licensed in more states the growth of the site should speed up. With more time this site will be a great innovation for student loans.