Here’s a handy list of terms that will help you understand the People Capital borrowing and lending process.
Please email us with your suggested additions.
Glossary
Definitions
Accredited Investors
Please note: At the current time all lenders on the People Capital platform must be accredited investors or entities. Which means that they must meet the following requirements:
- A bank, insurance company, registered investment company, business development company, or small business investment company
- An employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million
- A charitable organization, corporation, or partnership with assets exceeding $5 million
- A director, executive officer, or general partner of the company selling the securities
- A business in which all the equity owners are accredited investors
- A natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase
- An individual with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
- A trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases are made by a sophisticated person
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Age of Majority
The age at which a person is recognized by law to be an adult and, thus, capable of managing his or her own
affairs. At this age a person becomes responsible for any legal obligations created by his or her actions.
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Approved Educational Expenses
Educational expenses, such as tuition and fees, room and board, books, school supplies, and transportation.
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Auction
After a loan request is posted, the auction process begins. Lenders can examine the loan and compare it to other loan requests that are posted and available for bidding
at that time. Lenders who wish to fund a loan submit a "bid" for the loan. For more information, see How does the auction process work?
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Auto-Bid
Auto-bid is a system tool that automatically places bids on a lender's behalf, based on specific filters or
criteria. Lenders select the dollar amount of their available funds to allocate to a particular auto-bid,
the interest rate at which all bids will be submitted and the terms of the bidding.
There are two options on how to control the amount of bids submitted by an auto-bid:
- Option 1: Place a fixed amount per loan match (e.g., if you enter $1,000, and 5 loans match your criteria,
then 5 individual bids will be submitted in the amount of $1,000 each, regardless of the total loan request. A
total $5,000 of your Auto-bid funds will be committed.) Example: For every loan that matches my auto-bid
criteria, I want to bid $1,000.
- Option 2: Place a percent amount per loan match (e.g., if you enter 20% and 5 loans match your criteria,
then 5 individual bids will be submitted in the amount equal to 20% of the total loan request. The total amount
of these bids will be committed from your Auto-bid funds. You can restrict the percent amount bids by specifying
a minimum and maximum bid amount.) Example: For every loan that matches my auto-bid criteria, I want my bids to
equal 20% of the total loan request. I want my bids to equal 20% of the total loan request and the amount of my
bids to be at least $1,000 but not to exceed $5,000.
The auto-bid engine queues all the auto-bids and uses an algorithm to maintain fairness and ensure that no auto-bid is favored over another. When an auto-bid is selected, the lender's search criteria will identify all qualifying loans and then submit bids based on the lender's restrictions.
While auto-bidding provides convenience, like all bids, none are guaranteed to be accepted or guaranteed to win a particular auction.
Lenders cannot allocate funds to multiple auto-bids that exceed their available account balance. The amount specified for an auto-bid does not "lock" those funds in the account. Regardless if bids are placed manually or via auto-bids, the amount of Open Bids can never exceed the amount of available funds.
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Balloon Loan
A loan with one large payment (the balloon payment) due upon maturity. A balloon loan often features low payments, requiring little capital outlay during the life of the loan. Since most of the repayment is deferred, the borrower has flexibility to utilize the available capital during the life of the loan. One drawback is that the borrower must be self-disciplined in preparing for the large single payment, since interim payments are not made.
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Bid
A bid is a commitment made by a lender to purchase all or part of a borrower's loan from People Capital when
it is originated. Each loan listing resembles an auction — borrowers list maximum
interest rates they wish to pay and lenders then review the request and bid the rate down, if they are interested.
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Borrower
To borrow money through People Capital you must:
- Be enrolled at least half time and pursuing a degree at a
US educational institution.
- Be both a citizen and a resident of the United States.
- Have a valid Social Security number.
- Be at least eighteen and the age of majority in your state of residence (which must be a state in which people Capital is
).
Please note that People Capital has no borrower minimums for
Credit Grade or
Human Capital Score™.
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Borrower Payment Dependent Notes
On People Capital's lending platform, investors bid on borrower listings and purchase Notes from
an affiliate of People Capital that are dependent for repayment on the payments People
Capital receives on the corresponding loans. These "Borrower Payment Dependant Notes" represent lenders' interest in, and rights to, the repayment stream,
in proportion to the amount of the loan in which they participate.
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Co-Borrower
A co-borrower is a co-signer who is individually and jointly liable for a your loan. Since they are legally obligated, co-borrowers are normally trusted friends or
family members of the borrower. In order to be a co-borrower for your loan, an individual must be a citizen and resident of the United States and have a valid Social Security number.
The co-borrower must be the age of majority in his/her state of residence (which must be a state in which People Capital is currently licensed).
The co-borrower must have a credit grade of C+ or better.
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Credit Report
A complete and confidential summary of your credit history — including your existing debts and how well you've repaid past debts — which indicates your creditworthiness. A credit report also lists the companies that have inquired about your credit history recently, and any bankruptcies, foreclosures, and judgments you've encountered. Your credit report will also probably include current and prior addresses, current and prior employment, and other personal information such as your social security number, date of birth, and driver's license number.
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Credit Grade
A credit grade represents your relative risk of defaulting on your loan based upon traditional credit scoring methodologies. People Capital uses VantageScore from
Experian, a proprietary credit scoring system developed jointly by Experian, Equifax, and Trans Union — the big three credit scoring agencies. We create your credit
grade by converting your raw numerical VantageScore into a scoring system based upon a proprietary weighted formula as follows:
|
VantageScore
|
Credit Grade
|
|
A+
|
945 - 990
|
|
A
|
900 - 944
|
|
B+
|
854 - 899
|
|
B
|
809 - 853
|
|
C+
|
763 - 808
|
|
C
|
718 - 762
|
|
D+
|
672 - 717
|
|
D
|
627 - 671
|
|
E+
|
582 - 626
|
|
E
|
537 - 581
|
|
F
|
501 - 536
|
|
NC
|
0 - 500
|
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Electronic Fund Transfer Act
The Electronic Fund Transfer (EFT) and Regulation E establish the basic rights, liabilities and
responsibilities of consumers who use electronic transfer services and of financial institutions that offer these
services.
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Employer Identification Number (EIN)
An Employer Identification Number (EIN) is also known as a federal tax identification number, and is used to identify a business entity.
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Equal Credit Opportunity Act
The Equal Credit Opportunity Act (ECOA) was enacted in 1974 and makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract); to the fact that all or part of the applicant's income derives from a public assistance program; or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act.
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Experian
One of the 3 major credit bureaus, Experian was created in 1996. Experian has headquarters in Costa Mesa, California, and Nottingham, UK. The other two national credit bureau agencies are TransUnion and Equifax.
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Federal Credit Reporting Act
The Federal Fair Credit Reporting Act (FCRA) promotes accuracy, fairness, and information privacy in any
given consumer reporting agency (CRA). Most CRAs are credit bureaus that gather and sell data about you —
such as if you pay your bills on time or have filed bankruptcy — to creditors, employers, landlords, and
other businesses. You can find the complete text of the FCRA, 15 U.S.C. §§ 1681-1681u, at the FTC's web site.
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Federal Loans
Federal loans are low interest rates loans that do not require credit checks or collateral. Student loans include the Federal Stafford and Federal Perkins Loans.
Until recently, the majority of loans were made by private entities (e.g. Sallie Mae, Citibank, Nelnet and thousands of Banks) but were “guaranteed” by Federal
guarantors and the Federal government. The Federal Student Loan Program also offers Federal student loans that are originated and "guaranteed" by the government
(often referred to as The Federal Direct Student Loan Program). There is currently pending Legislation which may eliminate the Federal Student Loan program
which banks participate in. This would mandate that 100% of Federal student loans go through the Direct Lending Program.
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Federal Truth-In-Lending Act
The Truth in Lending Act is designed to protect consumers in credit transactions, by requiring clear
disclosure of key terms of the lending arrangement and all costs. It also gives consumers the right to cancel
certain credit transactions.
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Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) is a United States statute added in 1978 as Title VIII of the
Consumer Credit Protection Act. It aims to eliminate abusive practices in the collection of consumer debts,
promote fair debt collection and provide consumers with a means for disputing and obtaining validation of debt
data, in order to ensure data accuracy. The Act creates guidelines under which debt collectors may conduct
business, defines rights of consumers involved with debt collectors, and prescribes penalties and remedies
for violations of the Act.
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FICO® Score
A FICO® score is a numerical rating developed and maintained by the Fair Isaac Corporation that is an indicator of a borrower's creditworthiness. A version of the FICO® score is calculated by all three of the major credit bureaus from reported information.
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Hard Inquiry
An inquiry about your credit history made by a creditor or lender with whom you have applied for a loan or line of credit. Creditors and lenders see hard credit report inquiries that are up to two years old when they look at your credit report. Hard inquiries are also used in the calculation of your credit score; too many hard credit report inquiries can reflect negatively on your creditworthiness.
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Higher Education Act
The Higher Education Act of 1965 was enacted to strengthen the educational resources of colleges and
universities and to provide financial assistance for students in postsecondary and higher education.
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Human Capital Score™ (HCS)
The Human Capital Score™ is a proprietary credit risk measure developed by People Capital. It calculates future income potential by including variables such as GPA,
standardized test scores, college and major. For students — who have short or no credit history — a traditional credit measure (based upon credit payment history) is unlikely
to be an appropriate measure of credit risk. Note that the current version of the Human Capital Score™ is best
calibrated for Bachelor's degrees (we are working on future enhancements that will make the HCS applicable
to other degree types). Learn more about the Human Capital Score™
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Interest-Only-With-Balloon
The borrower that chooses this loan type will only pay the greater of the interest due on the loan or a $50 minimum on a monthly basis while they are enrolled in school and for eleven months after their anticipated graduation date. On the twelfth month after the anticipated graduation date, the remainder of the loan is due in full. This last payment is what is known as a balloon payment. The available durations of Interest Only with Balloon loans (2 to 5 years) are based on the student's current year of enrollment. Students requesting this type of loan must apply for a minimum of $1,000.
- 2-year Interest Only with Balloon
- 3-year Interest Only with Balloon
- 4-year Interest Only with Balloon
- 5-year Interest Only with Balloon
Example: A person in their freshman year expecting to graduate in four years would qualify for a 5-Year Interest Only with Balloon loan. They would only pay the monthly interest during the four years they are enrolled in school and eleven months after graduation. On the twelfth month, the remaining balance of their loan is due. Likewise, a person in their senior year would only qualify for a 2-Year Interest Only with Balloon loan.
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Lender
Lenders can buy Borrower Payment Dependent Notes issued by
an affiliate of People Capital. The proceeds of each series of Notes are designated by the lenders who purchase them for funding
a corresponding loan. Read more about
Currently, all People Capital lenders must be accredited investors as defined under Rule 501 of
Regulation D
promulgated under the Securities Act of 1933.
Accordingly, to lend money through the People Capital platform you must qualify as one or more the following:
- A bank, insurance company, registered investment company, business development company, or small business
investment company;
- An employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank,
insurance company, or registered investment adviser makes the investment decisions, or if the plan has total
assets in excess of $5 million;
- A charitable organization, corporation, or partnership with assets exceeding $5 million;
- A director, executive officer, or general partner of People Capital;
- A business in which all the equity owners are accredited investors;
- An individual who has individual net worth, or joint net worth with the person's spouse, that
exceeds $1 million at the time of the purchase;
- An individual with income exceeding $200,000 in each of the two most recent years or joint income
with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level
in the current year; or
- A trust with assets in excess of $5 million, not formed to acquire the securities offered, whose
purchases are made by a sophisticated person
People Capital is required to verify, and will verify, that you qualify as an accredited investor before you will be
permitted to lend money through the People Capital platform.
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Loan Types
People Capital offers three types of loans with variable repayment options and maturities. They are:
Interest Only with Balloon
The borrower that chooses this loan type will only pay the greater of the interest due on the loan or a $50 minimum on a monthly basis while they are enrolled in school and for eleven months after their anticipated graduation date. On the twelfth month after the anticipated graduation date, the remainder of the loan is due in full. This last payment is what is known as a balloon payment. The available durations of Interest Only with Balloon loans (2 to 5 years) are based on the student's current year of enrollment. Students requesting this type of loan must apply for a minimum of $1,000.
- 2-year Interest Only with Balloon
- 3-year Interest Only with Balloon
- 4-year Interest Only with Balloon
- 5-year Interest Only with Balloon
Example: A person in their freshman year expecting to graduate in four years would qualify for a 5-Year Interest Only with Balloon loan. They would only pay the monthly interest during the four years they are enrolled in school and eleven months after graduation. On the twelfth month, the remaining balance of their loan is due. Likewise, a person in their senior year would only qualify for a 2-Year Interest Only with Balloon loan.
Standard Private Loan
The borrower that chooses this loan type will only pay the greater of the interest due on the loan or a $50 minimum on a monthly basis while they are enrolled in school and for eleven months after their anticipated graduation date. On the twelfth month after the anticipated graduation date, the remainder of the loan is paid in monthly installments consisting of interest and principal until the loan is repaid. This last series of monthly payments is what is known as amortized payments. The available durations for Standard Private Loans are ten or fifteen years. The Interest Only periods are based on the student's current year of enrollment. Students requesting this type of loan must apply for a minimum of $3,000.
- 10-Year Standard Private Loan with 2-Year Interest Only Period
- 10-Year Standard Private Loan with 3-Year Interest Only Period
- 10-Year Standard Private Loan with 4-Year Interest Only Period
- 10-Year Standard Private Loan with 5-Year Interest Only Period
- 15-Year Standard Private Loan with 2-Year Interest Only Period
- 15-Year Standard Private Loan with 3-Year Interest Only Period
- 15-Year Standard Private Loan with 4-Year Interest Only Period
- 15-Year Standard Private Loan with 5-Year Interest Only Period
Example: A person in their freshman year expecting to graduate in four years would qualify for a 10- or 15-Year Standard Private Loan with 5-Year Interest Only Period. They would only pay the monthly interest during the four years they are enrolled in school and eleven months after graduation. On the twelfth month, the remaining balance of their loan is paid monthly but includes interest and principal. Likewise, a person in their senior year would only qualify for a 10- or 15-Year Standard Private Loan with 2-Year Interest Only Period.
Straight Amortized Loan
The borrower that chooses this loan type makes monthly principal and interest payments immediately until the loan is repaid. There is no "Interest Only" period. The only duration available is 3 years. Students requesting this type of loan must apply for a minimum of loan amount of $1,000.
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Long Term Loan
Generally a loan over 10 years in duration.
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Member Payment Dependent Notes
See Borrower Payment Dependent Notes
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Note
See Borrower Payment Dependent Notes.
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Origination
All of the steps required to create a loan from application to disbursement. Once these steps are completed, the loan is originated.
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PCI-Compliant
PCI, or Payment Card Industry Security Standards Council, is an independent council originally formed by American Express, Discover, JCB, MasterCard and Visa, with the goal of creating and managing Payment Card Industry Data Security Standards.
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Peer-To-Peer Lending
Peer-to-peer or social lending helps credible lenders and borrowers find one another without involving a traditional financial institution. Peer-to-peer lending promotes social goals, removes overhead, and reduces the complexity of traditional bank lending models.
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Private Placement Memorandum (PPM)
A legal document that gives prospective purchasers of a company's securities details about the securities,
the company's business plan, investment information, and other pertinent details. Private placements are
offerings of securities in which accredited investors and typically only
limited number of unaccredited investors may participate. In the United States, securities offered pursuant to
these placements do not have to be registered with the Securities and Exchange Commission (SEC)
or state securities regulators if any exemption from registration is available, although the sale must in any
event conform to SEC rules.
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Regulation D (Reg D)
Under the Securities Act of 1933, any offer to sell securities must either be
registered with the US Securities and Exchange Commission (SEC) or meet certain qualifications
to exempt them from such registration. Regulation D (or Reg D) contains the rules providing exemptions from the
registration requirements, allowing some companies to offer and sell their securities without having to register
the securities with the SEC.
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Securities and Exchange Commission (SEC)
The US Securities and Exchange Commission (SEC) is an independent agency of the US government which holds primary
responsibility for enforcing the federal securities laws and regulating the securities industry, the US's stock and
options exchanges, and other electronic securities markets.
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Securities Act of 1933
The Securities Act of 1933 requires that investors receive financial and other significant information
concerning securities being offered for public sale. It also prohibits deceit, misrepresentations, and other
fraud in the sale of securities.
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Short Term Loan
Generally a loan under 10 years in duration.
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Soft Inquiry
When someone requests a copy of your credit report, it gets recorded as a soft inquiry. Soft inquiries do not affect your credit score, and they are not revealed to potential lenders or creditors.
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Standard Private Loan
The borrower that chooses this loan type will only pay the greater of the interest due on the loan or a $50 minimum on a monthly basis while they are enrolled in school and for eleven months after their anticipated graduation date. On the twelfth month after the anticipated graduation date, the remainder of the loan is paid in monthly installments consisting of interest and principal until the loan is repaid. This last series of monthly payments is what is known as amortized payments. The available durations for Standard Private Loans are ten or fifteen years. The Interest Only periods are based on the student's current year of enrollment. Students requesting this type of loan must apply for a minimum of $3,000.
- 10-Year Standard Private Loan with 2-Year Interest Only Period
- 10-Year Standard Private Loan with 3-Year Interest Only Period
- 10-Year Standard Private Loan with 4-Year Interest Only Period
- 10-Year Standard Private Loan with 5-Year Interest Only Period
- 15-Year Standard Private Loan with 2-Year Interest Only Period
- 15-Year Standard Private Loan with 3-Year Interest Only Period
- 15-Year Standard Private Loan with 4-Year Interest Only Period
- 15-Year Standard Private Loan with 5-Year Interest Only Period
Example: A person in their freshman year expecting to graduate in four years would qualify for a 10- or 15-Year Standard Private Loan with 5-Year Interest Only Period. They would only pay the monthly interest during the four years they are enrolled in school and eleven months after graduation. On the twelfth month, the remaining balance of their loan is paid monthly but includes interest and principal. Likewise, a person in their senior year would only qualify for a 10- or 15-Year Standard Private Loan with 2-Year Interest Only Period.
Straight Amortized Loan
The borrower that chooses this loan type makes monthly principal and interest payments until the loan is repaid. There is no "Interest Only" period.
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Title-IV-School
Title IV of the Higher Education Act of 1965 covers the administration of the United States federal student financial aid programs. Only schools that are Title IV-qualified are eligible for private student loans.
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VantageScore
Launched in March 2006, VantageScore is a consumer credit scoring model across
all three major credit reporting companies — Equifax, Experian and TransUnion. Consumer scores fall within
a range of 501 to 990, with higher scores representing a lower likelihood of risk. Learn more
at www.vantagescore.com.
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W9-S form
A W-9S is an IRS form which certifies that the funds disbursed were used solely for education expenses.
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