Looking for feedback: Decentralized P2P Lending platform for education loans

[bugslayer]

Hi Guys,

We are developing a peer to peer lending platform for educational loans and scholarships called peerfin (https://www.peerfin.io/).

Peer to peer lending is one of the major disruptive forces of the 21st century. Decentralization, leading to disintermediation backed by widespread acceptance of the sharing economy is the key to removing middlemen (banks) from the picture. Peerfin has embraced the P2P revolution, offering its users educational loans that are fast, transparent, safe, easy and accessible at lower interest rates from lenders all over the world. All transactions occur directly on the platform, meaning students can receive and pay back loans without having to go through the trouble of the long, complicated and expensive process that the conventional banking system entails.


Please read our whitepaper: https://www.peerfin.io/whitepaper.pdf

For more Info Please join our telegram: https://t.me/peerfin



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[1713900395]

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[1713900395]

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[1713900395]

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[audaciousbeing]

My question is simple to your project because we need to do that before moving forward

1. How do you determine if I am really applying for a loan to fund my education? I could give you documents but how do you verify it?

2. You plan to make it accessible to the whole world, how will you ensure that someone in Africa whose school probably don't have adequate records who could just disappear from the radar after his education is held to ensure he paid the loan he had collected? Considering the primary location of your business could be several miles away in another continent.

[phwizard]

Just been to Dharma presentation at SF blockchain week, you might want to check them out, maybe use their platform as a basis if it suits your project:
https://dharma.io/

[shield132]

No one will invest in unprofitable business. In some small countries and in their universities someone who has access on database will send you documents of students, whom in reality don't need any loan and this way there will be a huge scam from some university employees, there are even facts of falsely given diplomas. Also banks in developed countries have low fees on loans.

[bugslayer]

My question is simple to your project because we need to do that before moving forward

1. How do you determine if I am really applying for a loan to fund my education? I could give you documents but how do you verify it?

2. You plan to make it accessible to the whole world, how will you ensure that someone in Africa whose school probably doesn't have adequate records who could just disappear from the radar after his education is held to ensure he paid the loan he had collected? Considering the primary location of your business could be several miles away on another continent.

Hi,

Answering your question

1. There are a few conditions before we issue a loan. 1. We only provide loans to masters degree (postgraduate).
2. You've been accepted to a school and programme we support
3. You have to upload all the supporting documents such as KYC, Proof of admission. Credit Reports* etc. More details will be available on our website FAQ soon.
4. We only disburse 80% of fund required for studies. If you require funds for additional living expense then we encourage to get a financial aid or most of the schools have their own program.
5. We only provide funding to a university account, not to a savings/personal account. For legal reasons, in most cases, this step can only be completed once a student arrives on campus. This is also to ensure that the student will avoid all the hassle and fees associated with currency transfers and the stress of ensuring an international wire makes it through before payment deadlines.

2. Unfortunately, our model doesn't work in that method. We want to be as realistic as possible. I can just say that decentralization and cryptocurrency is a solution to all but we run a business where we have to manage investor (the people who fund for students) interest. We will only provide loans to associated colleges/universities where we can vet the student information properly.

Thank you for the questions. Please let me know if you have more questions and concerns.

[bugslayer]

No one will invest in unprofitable business. In some small countries and in their universities someone who has access on database will send you documents of students, whom in reality don't need any loan and this way there will be a huge scam from some university employees, there are even facts of falsely given diplomas. Also banks in developed countries have low fees on loans.


Thank you for your feedback.


According to Morgan Stanley in a report in 2015 predicted that P2P lending would command $150 billion to $490 billion globally by 2020. The Compound Annual Growth Rate (CAGR) of 48.2% between 2016 and 2024 in P2P loan industry.

Company Name     Est. Revenue 2017
______________________________
Lendkey                   $7.5M
College Ave              $5M
Common Bond          $8.5M
Credible                   $8.9M

Above are a few examples of P2P lending companies. Everyone has raised more than $50M+. We believe that we can become one of them within the next five years if we go in the right direction.

Kindly go through our whitepaper. We do not fund to students directly. We use their data and vet with the university where we are associated. For example, if London Business School has Peerfin program, then a student coming from India or Brazil has to submit the proof of admission from LBS to start the loan process. The documents include your historical study record to proof of income and in some cases credit report.

Our risk assessment includes, but is not limited to, multiple elements such as pre-study salary, university acceptance and future income to ensure individual loan affordability; as opposed to only considering historical earnings data.

I do agree with your last point. Developed countries provide loan to students. It's easier to get a loan but the high interest and private organizations are killing the youth with the student debt. https://www.washingtonpost.com/news/grade-point/wp/2018/01/05/where-student-loan-debt-is-a-real-problem/  In fact student loan is so huge that some are predicting that it's going to be the next bubble.

In a country like India where student loans absolutely require a co-signer. When loan amounts exceed a certain minimum (Usually $10,000 above) collateral is also required in most cases. Families wishing to go this route will be asked to put their house on the line – and therefore decide which child will be able to attend university.

I will be posting more about our platform soon in the forum. I'm a newbie here so please ignore if there is any mistake.

[bugslayer]

Just been to Dharma presentation at SF blockchain week, you might want to check them out, maybe use their platform as a basis if it suits your project:
https://dharma.io/


We are aware of Dharma. We do have a working module already that takes documents from students, notarize and forward the docs for the verification. We are now working on the AI and ML part with student data.

Thank You

[shield132]

I wouldn't quote your reply because it will take a lot of space and won't look nice, so...
bugslayer
You make quotes wrongly, you don't have to put answer immediately after my proposal, you have to write your answer after [/quote].
I don't know much p2p lending examples, but I know many project has failed.
In developed countries there are low fees on loans, is 4% higher? Well, in another countries it's usually 10% and more, these countries can be prioritized but they will have high risk of non repayment. Well, you know who is your target.

[Patatas]

1. Most of the governments offer education loans if not the private financial services. These services are very flexible with interests rates and repayment options. Why exactly was decentralisation needed here? The financial services make sure one doesn't abscond after availing a loan.

2. Lending is a risky business on the blockchain. No collateral, no identity management, no location/university verification. I doubt this is going anywhere.

[bugslayer]

I wouldn't quote your reply because it will take a lot of space and won't look nice, so...
bugslayer
 

Thank you for letting me know about the "quote" I actually didn't know that it's necessary.


Well, I live in the US and the interest rate here starts at 7.5%+ and it goes on from that depending on your credit score. We have signed up with a college in India where students are taking loans at 10% - 15%. 15% usually if they are going overseas for studies. But even in countries like India, the student loan default is super low compared to personal or other mortgage loans.

Yeah. We know our target very well. We will let you know once we publish our beta site.  

[bugslayer]

1. Most of the governments offer education loans if not the private financial services. These services are very flexible with interests rates and repayment options. Why exactly was decentralisation needed here? The financial services make sure one doesn't abscond after availing a loan.

2. Lending is a risky business on the blockchain. No collateral, no identity management, no location/university verification. I doubt this is going anywhere.

1. Yes. they do offer. Problem is they don't directly offer it. In the US private agencies like Sallie Mae is doing it. The whole idea of student loan program was to provide a way for poor minorities so forth to get them away to go to college and loans were administrated largely by the Federal government banks but in the late 1990s through the privatization of Sallie Mae they turned over this extremely important function largely to the private banks, financial institutions, and private equity companies. Sallie Mae not just issued bonds but more importantly they privatized delinquent loans collectors.

After the privatization, Sallie Mae CEO Albert Lord made so much money that he builds his own private golf course in Southern Maryland near Annapolis so he and his buddies could play golf. Under Albert Lord, Sallie Mae paid colleges to drop out of the federal program and make Sallie Mae the loan provider. It put their own employees in university call centers as if the students were getting advice from college loan officers. It lavished exotic trips on college financial officers. It even paid a New Jersey agency $15 million to steer business to Sallie Mae. Needless to say, the Department of Education didn’t have a budget to entertain college aid officials with free cruises on the Potomac River. If you are burdened with thousands or tens of thousands in student debt, and can’t find employment, I just wanted you to assure you that Wall Street is making very good use of your money

2. Yes. Lending is a risky business if you have no idea what you are doing. We use blockchain to use ledger technology and manage student data and notarization. If you read our whitepaper, you will understand that. Kindly go through my above answer for the university verification etc to understand the process.

We have done our research. Please go through our blogs to understand more about what we are trying to do - https://medium.com/peerfin

[eternalgloom]

Just read through your white paper and I'm wondering how you could possibly verify all the documents that students have to submit. 
I'm posting images instead of quoting the text, since copying from the whitepaper gives me some really weird formatting issues.



Would you only be offering this in the US or also in other countries? 

I also saw that the requirements of becoming a lender are quite impressive to say the least:



Any reason why you have those requirements for lenders in place?

[Atherus]

A lending platform is a good idea. I think that the most difficult part in the implementation of the idea is who you will manage collaterals. If you do it successfully and you eliminate scammers, then Good Job!

[Patatas]

1. Yes. they do offer. Problem is they don't directly offer it. In the US private agencies like Sallie Mae is doing it. The whole idea of student loan program was to provide a way for poor minorities so forth to get them away to go to college and loans were administrated largely by the Federal government banks but in the late 1990s through the privatization of Sallie Mae they turned over this extremely important function largely to the private banks, financial institutions, and private equity companies. Sallie Mae not just issued bonds but more importantly they privatized delinquent loans collectors.

But do all the students deserve loans? If they keep giving out loans to minorities without any obligations, it doesn't guarantee they will get their money back with interests. I think the loans should be given but only to the deserving students. Like one has shown a good academic record in the previous courses.

After the privatization, Sallie Mae CEO Albert Lord made so much money that he builds his own private golf course in Southern Maryland near Annapolis so he and his buddies could play golf. Under Albert Lord, Sallie Mae paid colleges to drop out of the federal program and make Sallie Mae the loan provider. It put their own employees in university call centers as if the students were getting advice from college loan officers. It lavished exotic trips on college financial officers. It even paid a New Jersey agency $15 million to steer business to Sallie Mae. Needless to say, the Department of Education didn’t have a budget to entertain college aid officials with free cruises on the Potomac River. If you are burdened with thousands or tens of thousands in student debt, and can’t find employment, I just wanted you to assure you that Wall Street is making very good use of your money

Student loans are a different issue, unemployment is other. Loans are an personal economical incapability, unemployment is socio-economical. They aren't dependent on each other.

2. Yes. Lending is a risky business if you have no idea what you are doing. We use blockchain to use ledger technology and manage student data and notarization. If you read our whitepaper, you will understand that. Kindly go through my above answer for the university verification etc to understand the process.

We have done our research. Please go through our blogs to understand more about what we are trying to do - https://medium.com/peerfin

Who are the investors? Will all the people involved in giving out loans would be your own set of investors or the general public? Not everybody has time to read the white-paper, you should update your website with a summary of your project/introduction.

[bugslayer]

Just read through your white paper and I'm wondering how you could possibly verify all the documents that students have to submit. 
I'm posting images instead of quoting the text, since copying from the whitepaper gives me some really weird formatting issues.

https://i.imgur.com/1VPwJN4.png

Would you only be offering this in the US or also in other countries? 

I also saw that the requirements of becoming a lender are quite impressive, to say the least:

https://i.imgur.com/wc6I9uY.png

Any reason why you have those requirements for lenders in place?

Answering your questions one by one

1. KYC verifications can be done via agencies who are doing KYC checks for local banks/passports. For example, In the US many private agencies check the SSN and validate user details. About the certificates, we are only processing loans to those people who are admitted to colleges/universities where we are associated. Universities/Colleges have to do the certificate verification, and they have a strong team who are already doing a good job.

2. At present, we are focusing on EU, India and a couple of other countries. We would launch in the US once the SEC has clear regulation about the security part of the crypto offering companies.

3. We do not want to raise funds from the public. The reason why we are only welcoming accredited investors because an accredited investor will have the financial sophistication and ability to sustain the risk of loss of investment. This is one reason why we are not doing an ICO. We believe that doing an ICO will bring money for the company, but that will not add value in the long run. We are only raising investment via private round and from individuals who can help us to reach the next level.

Please let me know if you have any more questions.

[bugslayer]

A lending platform is a good idea. I think that the most difficult part in the implementation of the idea is who you will manage collaterals. If you do it successfully and you eliminate scammers, then Good Job!

Totally agree with your point. Educational loans have low defaults when you compare personal or credit cards. Online lending platforms like Lending Club and Kiva was reporting 10% in the beginning and eventually decrease to 2-5%. We are hoping the same.

Few ways we are protecting investors investment is by signing legally bindable documents. If a lender is deliberately defaulting his loan then we can take legal action against him.

But the true challenge is not the above part. The challenge is to understand when a student is going to default. The economic circumstances across the world are constantly changing. These changes often feed into changes in the payment behaviour of borrowers. Tracking these changes are key to ensuring a consistent risk management framework is applied over time. In summary, in order to effectively manage the credit risk, the focus will be on systems, data and reporting capabilities. This will enable us to build and maintain accurate SPQ's (Student Performance Quotient) and limit losses.

Thank You

[bugslayer]

But do all the students deserve loans? If they keep giving out loans to minorities without any obligations, it doesn't guarantee they will get their money back with interests. I think the loans should be given but only to the deserving students. Like one has shown a good academic record in the previous courses.

What if a minority student is good at studies?

Avul Pakir Jainulabdeen Abdul Kalam a.k.a APJ Abdul Kalam - His father Jainulabdeen was a boat owner. He was a minority who sold newspapers to supplement his family's income at an early age. Kalam served as the 11th President of India. Why I said this because YES a minority student has every right to study.

Student loans are a different issue, unemployment is other. Loans are an personal economical incapability, unemployment is socio-economical. They aren't dependent on each other.

As a loan company, we will always advise filing unemployment status with the state immediately after you lose the job. Try to pay the loan interest and get a part-time job immediately (Uber, Doordash etc.) These gigs can earn you some extra cash while affording you the flexibility to go to job interviews and networking events to secure full-time work. We are Peerfin are more interested in processing loans to people who are trying to do masters in top colleges around the world where we believe that the risk rate is much lower than other colleges/universities.

Who are the investors? Will all the people involved in giving out loans would be your own set of investors or the general public? Not everybody has time to read the white-paper, you should update your website with a summary of your project/introduction.

We are taking funds from accredited investors, pension funds, impact investment funds etc. The reason why we are only welcoming accredited investors because an accredited investor will have the financial sophistication and ability to sustain the risk of loss of investment.