Here at Ratehub.ca, our goal is to educate consumers on how financial products work, so they can make better financial decisions. Until recently, however, there weren’t many companies that gave those same consumers more options to choose from, other than what a traditional financial institution could offer.
Two FinTech companies have changed that, by introducing a new option for anyone who needs a personal loan. This innovative industry is better known as marketplace lending and it’s changing the way Canadians can borrow.
When I first met with Kevin Sandhu (CEO) and the team at Grouplend, I assumed that what they were offering was a peer-to-peer lending solution, similar to what I’d seen advertised on some U.S. personal finance blogs. With peer-to-peer lending, almost anyone can become an investor. For example, if I lived in the U.S. I could lend some of my own personal savings to someone who needed it through one of the popular peer-to-peer lending platforms.
That’s not how marketplace lending works.
If you are thinking about taking out a personal loan, all you have to do is fill out a short application on either site, and their systems will run a quick credit check then give you an instant quote for the interest rate you are eligible for (including how much your monthly payment would be).
Similar to the way mortgage loans work, the higher your credit score is the lower your interest rate will be – and with marketplace lending, you can typically get rates lower than any traditional financial institution could offer. Grouplend offers rates as low as 6.3% and Borrowell can go down to 5.9%.
If you’re happy with the interest rate, you’ll need to send in some documentation, including verified ID and bank account information. Once you submit all of this, you can expect the loan to be deposited into your account within 1-3 business days (24 hours with Grouplend and 1-3 days with Borrowell) and your monthly payments will start to be withdrawn from that same account soon after.
Note: Grouplend currently offers loans of up to $30,000 for 3-year terms and Borrowell offers up to $35,000 for repayment terms of between 3-5 years.
The most obvious advantage of applying for a personal loan through a marketplace lending platform might be the low interest rates available for people with good credit scores, but it’s changing the way Canadians can borrow money by making it more convenient.
“With the technology available today, it’s silly to think that you still have to walk into a branch during business hours to do your banking or to have to pay the sorts of costs that traditional lenders charge their customers,” Sandhu recently told BetaKit.
“There are also a lot of anti-debt messages out there, and we offer a responsible way for Canadians to get out of it,” said Andrew Graham, CEO of Borrowell.
I’m certainly on board with the last part. If I’d been able to consolidate the $6,500 of credit card debt I used to carry into a personal loan at 6.3% versus the 11.99% I once paid, I could’ve saved $609 in interest costs over 3 years.
If responsible borrowing is the name of the game then marketplace lending is sure to change the way Canadians manage their finances.
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