Right now, you can take out a five-year loan for up to $25,000 from one of the credit unions that work with Zopa. The rate is based on your credit history.
Friends, families and even strangers help you by investing in a Zopa certificate of deposit. Currently, the one-year CD interest rate is 3.75 percent.
Every CD investor is awarded 10 basis points of interest - 0.10 percent - to give to a borrower to reduce his or her monthly loan payments, says Zopa's chief executive Douglas Dolton. And investors can agree to accept a lower rate on the CD, and divert even more interest to helping out a borrower.
There are no fees, Dolton says. The credit unions compensate Zopa.Virgin Money helps manage loans between friends and family. Last week, it introduced Student Payback, designed specifically for student borrowers.
For instance, a parent taking out a federal PLUS loan might want the student to help repay a part of the loan but at a lower interest rate, says Su Joun, student loan product manager.
The terms are spelled out in an agreement. Student Payback sends out monthly statements and can make automatic withdrawals from the student's bank account to repay Mom and Dad. And, if borrower and lender agree, Student Payback can report the payments to the credit bureaus.
Unlike Zopa, Prosper and Fynanz, Student Payback won't pursue defaulters through the courts. "Families tend to be more flexible," Joun says. Student Payback will work with both parties to come up with a plan to get a borrower back on track, she says.
The fee is $299 for handling up to 10 loans plus $9 per payment. That's a cost some families might gladly pay to avoid awkward conversations about IOUs.
"It makes the holidays that much easier," Joun says.
eileen.ambrose@baltsun.com
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