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How to get a business loan

A Shared Mission

This Veterans Day, the Tuck Armed Forces Alumni Association reflects on the power of shared values and goals and those who have fallen serving their mission.

Guest Student Contributor, November 10, 2017

How to get a business loan

The Tuck WIB Conference: Where it all Began

“My Tuck journey is still unfolding, but I am glad I had the courage to embrace the uncertainty of the MBA application process, and that Tuck offered me a forum to safely explore what it would be like to be a woman at Tuck and in business,” says Annie Johnson T’19.

Guest Student Contributor, November 09, 2017

How to get a business loan

Tuck s Core Curriculum Makes Short Work of B-School Goals

Sam Humbert T’19 looks back on his first term at Tuck and the skills he’s acquired thus far through the first-year core curriculum.

Guest Student Contributor, November 13, 2017

How to Consolidate Student Loans, how to consolidate student loans.#How #to #consolidate #student #loans

How to Consolidate Student Loans

Consolidating student loans can make educational debt easier to manage. Instead of having to handle payments for a series of student loans, you ll have one single monthly payment that covers everything. Only federal student loans are eligible for consolidation. The interest rate is fixed for the life of the loan and based on the weighted average of the interest rates of each loan being consolidated.

Determine Eligibility

You generally can consolidate student loans after you graduate, leave school or drop below the half-time level. At least one Federal Direct Loan or Federal Family Education Loan has to be in either the grace period or repayment process. If you want to consolidate a loan that s in default, you have to either make satisfactory repayment arrangements with your lender or agree to repay it under one of the Department of Education s payment plans that tie payments to your income level.

Get Application and PIN

Apply for a consolidated student loan at You ll need your Federal Student Aid personal identification number, or PIN, in addition to your personal information. If you don t already have a PIN, request one online at Once you re signed in, you can complete the Federal Direct Consolidation Loan Application and sign the promissory note. Or you can print out a paper application and mail the forms in if you choose. You ll generally mail the paperwork to whichever loan servicer you select. Addresses for each can be found at

Select Your Servicer

When filling out the application, you ll choose the loans you want to consolidate. In addition, if you have loans you don t want to consolidate, you ll list those separately. They won t be included in the consolidation, but the amounts can then be considered when determining the maximum repayment period. You ll then pick the loan servicer you want to handle the consolidation from among the options provided by the Department of Education. As of publication, the Department of Education has four consolidation servicers: FedLoan Servicing, Navient, Nelnet and Great Lakes Educational Loan Services Inc.

Pick a Payment Option

Select your payment plan; these generally offer the opportunity to pay off the loans in terms ranging from 10 to 30 years. Read the terms and conditions, then confirm the borrower and reference information. Once that s done, review and sign the documents. There are no application fees for a direct consolidation loan and no prepayment penalty.

Complete the Process

Once you finish your application, the loan servicer will complete the process. In the meantime, keep making your current loan payments until you receive confirmation that the consolidation has taken effect. As far as student loans go, what has been consolidated cannot then be torn asunder. Loans are paid off and replaced by the consolidated loan, so they no longer exist. While private lenders may be happy to take on your federal loans, this is rarely is a good idea for you, as you ll lose the rights and benefits you have with the individual loans before the process and with the consolidated loan afterward.

Student Loan Consolidation vs Refinancing, SoFi, how to consolidate student loans.#How #to #consolidate #student #loans

Student Loan Consolidation

Student Loan Refinancing

Refinancing your student loans sounds great. But it’s not for everyone.

Consolidating student loans via refinancing is best for people whose financial position – in terms of employment, cash flow, and credit – has improved since they graduated from school. People who are working in the public sector or taking advantage of federal debt relief programs such as income-based repayment or public service forgiveness may not want to refinance, as these programs do not transfer to private refinance loans.

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  • How to consolidate student loans
  • How to consolidate student loans

Healdsburg, CA 95448

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (

To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

The Money Company, Forest Park, Illinois, Personal Loan Lender, money to loan.#Money #to #loan

How to Get Cash

Your expenses don t always come on your payday. And sometimes they all come at once! We are here for you when you need extra cash to make ends meet! Every day, we help people just like you. We can help you too!

Fast and Easy Application

Take a few minutes to see how easy it is to qualify for your cash. Just complete the easy online application or apply by phone by calling (708) 366-3267. Our friendly Money Company Loan Associates will be happy to help you get your cash.

Fast and Easy Approval

After we receive your application, we will contact you and let you know how to proceed to the next step. In most cases, you will be pre-approved by The Money Company. We then ask you to come to our office and bring your State ID, Pay Stub (or benefit statement) and Bank Statement (if you have a bank account).

Fast and Easy Cash

Once you bring your documents to our office, we can move you to the approval process. We will establish an easy payment schedule and repayment method that best meets your needs. You will then GET YOUR CASH – it is as easy as that! Apply Now to see how quickly you can get your cash!

Money to loan Money to loan

Choose Your Loan

The Money Company offers several types of loans to meet your unique needs. Our loans don’t require a credit check and offer easy, convenient repayment options. Our loans allow you to repay your loan over time with easy, affordable installment payments. There is NEVER a penalty for paying off early – you only pay for the days used!

Money to loan

Starter Loan

Starter Loans allow you to build a relationship with our company. Starter Loans have easy requirements ​and offer several easy and convenient payment options. Starter Loans require regular employment income OR benefit income BUT you do not need a checking account (additional terms and conditions may apply). Once you have established a Starter Loan history with our company you may be eligible for our Installment Loan or Signature Loan! ​

Money to loan

Installment Loan

Installment Loans are available to qualified customers who have established a satisfactory record with our company. Installment Loans offer higher loan amounts, lower rates, and a repayment plan tailored to your specific financial need.

Money to loan

Signature Loan

Signature Loans are for our most qualified customers. Signature Loans offer our highest loan amounts, lowest rates, and easiest repayment plans. Ask our friendly Loan Associates how to apply for our Signature Loan.

Money to loan Money to loan

FinAid, Loans, Student Loans, how to apply for student loans.#How #to #apply #for #student #loans

how to apply for student loans

How to apply for student loans

How to apply for student loans

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How to apply for student loans

How to apply for student loans

How to apply for student loans

How to apply for student loans

How to apply for student loans

How to apply for student loans

How to apply for student loans

How to apply for student loans

How to apply for student loans

How to apply for student loans

How to apply for student loans

How to apply for student loans

Student loan options can be overwhelming at first glance. But when it comes to federal student loans, there are just a few options.

The first step in getting one of the federal student loans listed below is to fill out the Free Application for Federal Student Aid, or FAFSA. While the FAFSA does determine eligibility for need-based aid, it also acts as an application for student loan options, both for need-based and non-need-based loans. It supplies students who need financial aid with that help as well as provides financing options for those students that would like to borrow with low-interest federal loans but don’t necessarily qualify for need-based aid.

Subsidized Stafford Loan

The subsidized Stafford Loan is available to students who qualify for need as determined by the FAFSA. Students must be a U.S. citizen or eligible non-citizen as well as have a high school diploma or GED. Like most federal student loans, interest does not accrue while the student is in school. If students qualify for a subsidized Stafford Loan, it will be stated on their award letter notification along with the amount for which they can borrow.

The Perkins Loan is another federal loan option that is for needy students. Again, students must be a U.S. citizen or eligible non-citizen as well as hold a high school diploma or GED. Again, interest does not accrue with the Perkins Loan, and students will find out whether or not they qualify as well as for how much when they receive their award letters from colleges.

Unsubsidized Stafford Loan

Finally, the unsubsidized Stafford Loan is a little different from the other federal loans. For both the subsidized Stafford and Perkins Loans, students must qualify for need as determined by the FAFSA. However, the unsubsidized Stafford Loan is available to any student, regardless of need. Also, unlike the other federal loans, interest accrues while the student is attending school. Again, if students want to apply for the unsubsidized Stafford Loan, they must complete the FAFSA.

Students can also qualify for a federal student loan consolidation after graduating from college or graduate school.

Student Loan Income-Based Repayment (IBR) Calculator, Student Loan Hero, how to apply for a student loan.#How #to #apply #for #a #student #loan

Student Loan Income-Based Repayment (IBR) Calculator

Income-Based Repayment (IBR) is a repayment plan available to federal student loan borrowers. It s based on the idea that how much you pay each month should be based on your ability to pay, not how much you owe. When applying for IBR, the government looks at your income, family size, and state of residence to calculate your monthly payments.

Personal info

Adjusted gross income

Family size

State of residence

Annual income growth

Loan info

Were any of your federal student loans disbursed before July, 2014?

Total federal student loan balance

Current monthly payment

Avg. weighted interest rate

How to apply for a student loan

Student loan refinancing rates as low as % APR. Check your rate in 2 minutes.

Total balance paid

Total forgiveness


Income-Based Repayment (IBR) Calculator FAQs

1. What assumptions does the IBR Calculator make?

For the IBR Calculator to provide a forgiveness estimate, we have to make some assumptions which may or may not be true in everyone’s case. The calculator assumes the following:

  • Your family size will remain the same during the life of the loan.
  • Poverty guidelines will increase based on the Congressional Budget Office’s estimate of inflation.
  • All loans are unsubsidized loans for the purposes of interest accumulation.
  • The current interest rate won’t change during the life of the loan (even for loans with variable interest rates).
  • You meet all eligibility requirements to enroll in IBR (see below).

2. Am I eligible for IBR?

Income-driven repayment plans are complicated, so we can’t guarantee that receiving a result from this calculator guarantees you’re eligible for IBR.

Generally, anyone with qualifying federal loans (see below) who also meets income requirements is eligible for one form of IBR. However, there are two variations of IBR (see #3 below).

Our calculator uses the date when you first received federal student loans to use the correct IBR variation in your case.

Loan types that are eligible for IBR include:

  • Direct Loans (both Subsidized and Unsubsidized)
  • Direct PLUS Loans (made to graduate or professional students only)
  • Direct Consolidation Loans
  • Federal Stafford Loans (both Subsidized and Unsubsidized, eligible if consolidated)
  • FFEL PLUS Loans (made to graduate or professional students only, eligible if consolidated)
  • FFEL Consolidation Loans (eligible if consolidated and only if does not contain parent loans)
  • Federal Perkins Loans (eligible if consolidated)

Loan types that are generally ineligible for IBR are:

  • Parent PLUS Loans
  • FFEL PLUS Loans made to parents
  • Direct Consolidation Loans that repaid a Parent PLUS Loan

3. Why does this calculator ask when my loans were first dispersed?

There are technically two different versions of IBR. The one which you may be eligible for depends on when you first received federal student loans.

Version 1: “Old” IBR (for new borrowers before July 1, 2014)

  • Limits payments to 15 percent of discretionary income (and never more than the 10-year Standard payment amount)
  • Forgiveness after 25 years of payments

Version 2: “New” IBR (for new borrowers on or after July 1, 2014)

  • Limits payments to 10 percent of discretionary income (and never more than the 10-year Standard payment amount)
  • Forgiveness after 20 years of payments

4. What options do I have other than IBR?

PAYE limits student loan payments to 10 percent of discretionary income (and never more than the 10-year Standard payment amount). PAYE is only available to new borrowers as of October 1, 2007, or later.

Like PAYE, REPAYE limits monthly student loans payments to 10 percent of discretionary income. However, REPAYE is available to any borrower who has qualifying loans regardless of when he or she started borrowing.

If you re not sure IBR or similar plans are right for you, answer a few questions below and we can help point you towards a solution!

3 Ways to Calculate Interest Payments, how to calculate interest on a loan.#How #to #calculate #interest #on #a #loan

How to Calculate Interest Payments

Not all loans are created equal. Understanding how to calculate a monthly payment, as well as the amount of interest you’ll pay over the life of the loan, are very helpful in choosing the perfect loan for you. Understanding exactly how the money adds up can requires you to work with a complex formula, but you can also calculate interest more simply using Excel.

Steps Edit

Method One of Three:

Quickly Comprehending Your Loan Edit

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

Method Two of Three:

Calculating your Payment by Hand Edit

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

Method Three of Three:

Calculating your Interest with Excel Edit

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

How to calculate interest on a loan

Community Q A

  • Calculate the first six months of interest at that rate and add it to the principal. Then, continue your calculation using this amount with the adjusted rate of interest.
  • Typically when you miss a payment the monthly payment amount does not change, but you will be charged a late fee which could be a fixed amount or an amount per day until the payment is made. However, if you do need to calculate the interest on missed payments, you would add the principal amount from the payments you missed and then use that amount in your calculation with the monthly interest rate. A loan amortization schedule will show you exact breakdown of principal to interest for each payment.
  • A line of credit is not a loan, but the lender’s agreement to provide a loan under certain conditions specified in the line of credit agreement. Lenders usually charge fees for a line of credit since it restricts their lending capacity. However, a line of credit until funded does not provide any cash to repay another loan. As a consequence, it appears that you will need to make a loan to pay off an older loan.
  • An interest payment is based upon the annual interest rate and the principal amount outstanding for the period. Presuming that you are making interest payments only on a term loan, divide the interest rate stated in the loan documents by the number of payments made in a year. Multiply the result times the principal outstanding. For example, if you have a $10,000 loan at 10% interest, your annual interest payments would total $1,000. If you make quarterly payments, you would pay $250 each quarter.
  • The ”total” monthly payment (including principal) would depend on the length of the loan. Using “simple” interest, the monthly interest payment would be roughly $85.
  • This gives you a monthly payment of $17,548.56, using the calculations given in this article. Multiply by 24 payments and you are paying a total of $421,165.44. Subtract that from the original $400,000, and you’re paying a total interest of $21,165.44. Your average monthly interest paid would be around $881.90.
  • Calculate the interest payments normally, but exclude the irregular ones and add them at the end. For example, if interest is £10 per month for 12 months, but one month it was 9 and one month it was 16, you’d calculate the 10 normal months and add the two irregulars at the end.
  • Start with the outstanding balance on the loan at the beginning of the current year. Multiply that balance by the loan’s APR (interest rate). Divide that number by 12. That is how much interest you pay in one month.
  • Leaving aside the complicating question of compound interest (by which your friend would owe you additional interest on all the unpaid interest), you would simply multiply $2500 by 53%. That’s how much interest your friend owes you at this point, in addition to whatever portion of the original principal you expected to get back by now (probably the whole thing!). 1% of $2500 is $25. That makes the calculation easy: your friend owed you $25 in interest every month, or a total of $1,325 over the period of 53 months, plus the original $2500. $25 continues to be added on every month.
  • That’s 3 percent each year for five years, which amounts to 15 percent simple interest over the whole period. In terms of compound interest, it would be more than that, depending on how often the interest is compounded.

Reusable Spreadsheet to Calculate Interest Payments Edit

The following table details how to use Excel, Google Docs, or similar spreadsheet programs to calculate simply interest payments on anything. Simply fill it in with your own numbers. Note that, where it says F x = <\displaystyle Fx=>, you must fill this part in the upper bar of the spreadsheet labeled “Fx.” The numbers (A2, C1, etc.) correspond to the boxes as they are labeled in Excel and Google Docs.

How to Get a Small Business Loan With Bad Credit – No Collateral, how to get a loan with bad credit.#How #to #get #a #loan #with #bad #credit

How to Get a Small Business Loan With Bad Credit & No Collateral

How to get a loan with bad credit

Having bad credit and no collateral doesn’t eliminate the possibility of a loan.

George Doyle/Stockbyte/Getty Images

Related Articles

  • 1 [Woman Get Start] | How Can a Woman Get Start Up Funds for a Business When She Has Bad Credit?
  • 2 [Guaranteed Small Business Loan] | How Can I Get a Guaranteed Small Business Loan With Bad Credit?
  • 3 [Business Loan] | How to Get a Business Loan With No Credit
  • 4 [New Business Loan] | How to Start a New Business Loan With Bad Credit

Even with a poor credit rating and no money, you may still be able to get your new business off the ground, provided you have an idea that appeals to investors.

In order to secure a small business loan, most lenders will need you to prove your ability to repay the funds by providing information such as credit history, equity investment, collateral and business management experience. However, if you have bad credit but still want financial assistance to establish your business, you can achieve your dreams by being creative. There are lenders willing to provide the funds even when you have bad credit and no collateral.

Increase Your Chances

Devise a comprehensive business plan that projects a positive cash flow. If the business looks viable and runs on an excellent idea, more people will be willing to lend you money. In addition, take steps aimed at improving your credit worthiness to increase the chances of getting a loan. Request your credit report and check it for accuracy. Use it as a basis to systematically eliminate factors that are driving your score down, such as hard inquiries, late payments and credit usage.

Peer-to-Peer Financing

Peer-to-peer financing, also known as peer-to-peer investing or P2P lending, involves individuals rather than financial institutions providing unsecured business loans to borrowers. To apply, access the website of a lending company that pairs you with potential lenders. The transaction takes place online via peer-to-peer lending companies’ platforms that ascertain your authenticity. The interest rates for loans are set either by the lenders or the company that facilitates the transactions, based on the credit rating of the borrower.

Form a Partnership

If you have a good business plan and the business idea has a high growth potential, you may be able to attract a partner with good credit who can apply to the bank for a loan to start or boost the small business. Your partner is the cosigner and, depending on how you agree to service the loan, both of you are partially responsible for the loan repayment. Discuss the modalities of running the business with your partner — whether they expect to be actively involved in the business or they trust you to operate it.

Family and Friends

You may decide to approach relatives and friends that have the ability to lend you money for starting or expanding your business. If necessary, explain to them that your credit standing is not adequate for consideration by conventional lenders and that you do not have any form of collateral. Chances are they will understand your predicament and be willing to help. Be prepared to compromise – they may want to own part of the venture or be involved in the management of the business. Make a decision that is best for the viability of the business plan, and ensure that your business will generate ample cash flow to repay as per agreed terms to avoid upsetting the relationship.

Ask the Crowds

While not technically a business loan, many people get the financing they need for a new business idea using crowdsourcing websites like KickStarter, IndieGoGo and GoFundMe. This may be ideal if your business is creating a new product and needs money to fund production and distribution costs, or if your business is centered around an idea people can get excited about, like an independent film. If people like your idea, they will give you the funding in exchange for the product when it is finished or other perks, like t-shirts. If you are producing a physical object, you generally need to have a completed prototype to use these websites.

Bad Credit Car Loans – 9 Steps To Getting A Car Loan With Bad Credit, how to get a car loan.#How #to #get #a #car #loan

9 steps to getting a car loan with bad credit

How to get a car loan

9 steps to a car loan on damaged credit

Poor credit doesn’t mean you can’t buy a car, and doesn’t automatically mean you can’t get a car loan with terms that don’t break your monthly budget.

Like everything else, “bad” is a matter of opinion and degree. If the score is borderline, some lenders might still see a good prospect, while others would see more risk.

Most important: Shop around. While lenders will typically charge higher interest rates to subprime borrowers, you don’t just want to take the first rate you’re offered.

Here are nine strategies to help you find the best subprime auto loan.

How to get a car loan

1. Don t assume the worst

Don’t take someone else’s word that your credit is bad. Check for yourself by getting your credit report and credit score. You can get them for free at myBankrate.

Even two candidates with an identical score might not be the same in the eyes of a lender, says John Van Alst, staff attorney for the National Consumer Law Center. “Even if your score is tarnished, you may have a better chance than someone with the same score and no (credit) history,” he says.

How to get a car loan

2. Aim high

Keep in mind: Because car loans involve less money over a shorter period of time — and a car is easier to repossess than a home — the same credit score that might have put you in a subprime mortgage loan could bring you a prime or near-prime auto loan.

If you actually have good credit and apply for a subprime loan, it’s likely that you will get less favorable terms than you deserve.

How to get a car loan

3. Shop around

Some lenders will see your tarnished history in a more positive light than others, so it’s critical to shop around for the best rate.

But be careful if a lender or lot caters specifically to subprime consumers. Places that are appealing specifically to subprime should be a warning flag.

How to get a car loan

4. Start close to home

“Even if you don’t think you can get a loan, go to your bank, go to your credit union first,” Van Alst says. Apply at the bank where you have a checking account or your credit union. And see if your employer or insurance company offers auto financing.

How to get a car loan

5. Seek out car-finance lenders

Check out sources known for car loans, rather than lenders known for catering to low-credit clients. This can include name-brand national banks, local and regional banks, and well-known online lenders.

How to get a car loan

6. Don t go it alone

Ask a friend or relative to go with you, says Massachusetts-based consumer attorney Yvonne Rosmarin. Not only does it help to have another set of eyes and ears, but you can give your partner a role to play — such as acting unimpressed, dubious or critical of the loan terms.

How to get a car loan

7. Shop loan terms, not monthly payments

Look for the cheapest money — the lowest annual percentage rate over the shortest period. Don’t be sidetracked by promises of a lower monthly payment over a longer period of time. If the only way you can make the payments is to take out a long-term loan, you probably can’t afford the vehicle.

How to get a car loan

8. Look out for add-ons

Nonprime buyers are more likely to encounter lending contracts stuffed with nonessential goods and services, says Josh Frank, former senior researcher for the Center for Responsible Lending. Never allow the loan to be contingent on purchasing any add-on, such as extended warranties, after-market services and even insurance, he says.

How to get a car loan

9. Beware of the yo-yo

If you finance through a dealer, make sure the terms are final, not contingent or conditional, before you sign and drive away. All too often buyers are told days or weeks later that their monthly payments or the required down payment has been increased. Or they’re told the financing is not complete and they must accept a higher interest rate.

It’s sometimes known as a “yo-yo scam.” According to the Center for Responsible Lending, victims of yo-yo scams pay an average of 5 percentage points higher in interest than someone who is not a victim.

Morgan Stanley says peer-to-peer loans will soar to $22b in Australia by 2020, peer to peer loans.#Peer #to #peer #loans

Morgan Stanley says peer-to-peer loans will soar to $22b in Australia by 2020

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Peer to peer loans Morgan Stanley predicts P2P volumes in Australia will soar to $22 billion by 2020. Photo: Karl Hilzinger

The value of loans made through peer-to-peer lending platforms in Australia will surge to $22 billion in the next five years, investment bank Morgan Stanley predicts – crimping the profits of the big banks and forcing them to speed up investment in new technology.

By 2020, P2P lending to Australian consumers will soar to $10.4 billion and comprise 6 per cent of total consumer lending in Australia, suggesting the investment in Australian market P2P leader SocietyOne by media moguls James Packer and Ryan Stokes in December was well-timed.

In addition, P2P lending to small businesses would grow to $11.4 billion over the same period, Morgan Stanley said, at rates of growth faster than consumer credit, given constraints on big bank lending to SMEs.

P2P lenders, who are increasingly being referred to as “marketplace lenders” to reflect growing institutional funding of the loans, provide technology platforms that match borrowers with investors, offering both sides more attractive interest rates than banks.

Morgan Stanley estimates that less than $25 million has been lent to consumers so far by SocietyOne and competitor RateSetter. A third P2P lender, MoneyPlace, is preparing to launch. Marketlend and UK-based Thin Cats are also in the Australian market offering P2P loans to small businesses but P2P SME lending so far has been negligible.

Morgan Stanley said in a recent “Blue paper”, which received input from its Australian bank analysts Richard Wiles and Matt Dunger: “We believe there is an opportunity for P2P lending to establish a meaningful presence in Australia due to high online/mobile banking penetration, growing margins and high returns in unsecured lending and a highly concentrated banking industry focused on mortgages and deposits rather than on consumer unsecured [lending].”

Morgan Stanley said it expected SocietyOne, which launched in August 2012, to ultimately raise money from retail investors and expand the products and types of loans available to borrowers. The investment bank said it understood SocietyOne had received loan demand over its platform of about $100 million since launch and loan balances were now below $25 million.

Customer acquisition a key challenge

Much of the growth in borrower demand at SocietyOne had been driven by interest rate comparison sites such as RateCity, and the conversion rate of lending was relatively low, Morgan Stanley said. It highlighted raising awareness and acquiring customers as key challenges, because the big banks already had lock-up deals with consumer-facing companies like Qantas, Woolworths, and Coles.

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Strategic alliances to acquire customers would become more widespread, the report said. In March, and its joint venture Stratton Finance took a combined 20 per cent stake in RateSetter Australia. OnDeck, an online lender not using a P2P model, launched in Australia last month with a 30 per cent stake and distribution agreement from recently relisted small business accounting software provider MYOB.

Morgan Stanley highlighted a series of other risks to its view that P2P would take off. One was regulatory scrutiny by the Australian Securities and Investments Commission, “which could limit the growth prospects for retail funding of marketplace models”.

It also pointed to the sustainability of the business model through a downturn, a criticism made by Commonwealth Bank of Australia chief executive Ian Narev at The Australian Financial Review‘s Banking & Wealth Summit last month. “Unlike the US and UK, there is no real-life scenario that can be used to ‘stress test’ potential credit losses,” Morgan Stanley said.

The strength of the Australian banking oligopoly might also restrict P2P growth. “We believe that the major banks have more than enough financial strength to compete aggressively with P2P lenders or to attempt to replicate their technology and pricing models, if they choose to do so,” the investment bank said. However, it added: “At this stage, we doubt that the response will be particularly quick or aggressive.”

Banking ‘largely undisrupted’, says Packer

Some astute investors also believe Australia’s banks will be slow to respond to the P2P threat. Mr Packer said when investing in SocietyOne in December that “banking is an area that has been largely un­dis­rupted” and “that doesn’t make much sense given its profitability and margins”.

Other investment banks have also highlighted the size of the disruption being faced by Australia’s big banks, after customers moving online savaged the media and tourism industries. Last year, Macquarie Group estimated almost 30 per cent of the annual revenue of the major banks – or $27 billion – could be picked off by new players including P2P lenders in the long term.

In its report, titled Global marketplace lending: Disruptive innovation in financials, Morgan Stanley said there was a strong precedent in Australia for banking disruption, because mortgage brokers had had a material impact on the structure of the mortgage market and the margins that big banks earn on their home loan portfolios.

It pointed to an expansion in the margins of big banks’ consumer unsecured lending books by more than in any other major product segment since the financial crisis and the lack of innovation in unsecured personal loans. It also said that the move towards comprehensive credit reporting would help P2P players by allowing them to better assess borrowers’ creditworthiness.

Global P2P could hit $US490b by 2020

The arrival of P2P is a global dynamic and the report highlighted surging volumes in the US, where P2P lender origination has doubled every year since 2010 to $US12 billion ($15.2 billion) last year, but still represents only 1.1 per cent of total US consumer unsecured loan originations. The bank said this could reach 10 per cent by 2020, helping the global P2P market grow to between $US150 billion and $US490 billion by 2020.

Loan originations were being “turbo-charged” by institutional funding of loans, which made the term “peer-to-peer” a misnomer, Morgan Stanley said, adding that “marketplace lending” was a better description.

The report predicted more deals between global banks and P2P lenders, especially small and mid-sized banks, which have been losing market share to large banks over the past decade and have been working with online lenders to benefit both parties. This could evolve to a “lending-as-a-service” (LaaS) model, in which certain bank functions like credit underwriting, customer prospecting, and originations could be outsourced to marketplace lenders.

Research into bank customers had revealed millennials (born after the early 1980s) favoured fast, convenient, and cheaper credit and were more brand agnostic. Therefore, as incumbents’ key customers are getting older, maintaining market share would depend on investing in speed, faster/broader decision-making, and leveraging social media to improve the customer experience, Morgan Stanley observed.

In Australia, Morgan Stanley said the profitability of the big banks’ backbook reduced the likelihood that they would respond to the P2P threat by adopting “risk-based pricing” and they were more likely to focus on digital offerings.

“It is too early to tell how banks in Australia will respond given that marketplace lending has only just taken off,” it said. “However, we note that the major banks have been focused on developing their online and digital offerings, suggesting that they want to match the service proposition and ease of application provided by the marketplace lenders, even if they are unlikely to compete on price.

“In our view, the major banks will tolerate some loss of share to P2P lenders, rather than adopt risk based pricing for personal loans and credit cards. The high returns and profitability of their in-force portfolio mean that they are more prepared to sacrifice volume than price.”