Frequently Asked Questions (Lender)
Answers
Who can lend?
Lenders can buy
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
promulgated under the . 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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How do I lend money?
First you must register and then successfully complete our identification verification and fraud solution system. Once you have successfully registered as a lender,
you will need to deposit money into your People Capital account.
Please note: At this time, it may take up to 30 days to complete the accredited investor or entity verification process.
When there are available funds in your account, you can review borrower profiles and bid $1,000 or more on each loan listing. Once the listing time expires, if all or part of your bid is "winning" (meaning that it was one of the lowest bids totaling the loan amount), it will automatically be debited from your account and credited to the borrower at the time of loan . People Capital then collects your borrower payment(s) each month and automatically distributes the pro-rata share of principal and interest to your People Capital account.
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How soon can I use my deposited funds?
Once you deposit your funds with People Capital, the money will become available for your use based upon the following schedule. All times are based upon Eastern Standard Time zones (and assume no banking holidays): Deposits on Monday before 8:00 PM will be available by Thursday at 9:00 AM. -Deposits on Tuesday before 8:00 PM will be available by Friday at 9:00 AM. -Deposits on Wednesday before 8:00 PM will be available by Monday at 9:00 AM. -Deposits on Thursday before 8:00 PM will be available by Tuesday at 9:00 AM. -Deposits on Friday before 8:00 PM will be available by Wednesday at 9:00 AM. -Deposits on Saturday and Sunday before 8:00 PM will be available on Wednesday at 9:00 AM.
The lender will also need to verify the transaction.
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What is a bid and how does it work?
A bid is a commitment made by a lender to purchase all or part of a borrower's loan from People Capital
or its affiliates when it is . 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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What is an 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 as well
as 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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How does the auction process work?
The bid must have a minimum value of $1000, but can be as high as the total amount of the loan request. Along with the dollar value of the bid, the lenders must also specify the minimum interest rate they are willing to receive, if the loan is . (Please note: Lenders are bidding on loan request postings during the auction, but they are not bidding to purchase the loans directly. Instead, they will be purchasing Notes dependent for payment on payments that People Capital receives on the corresponding borrower loans.)
The "final" interest rate is the highest interest rate of all the winning bids.
First steps: initial loan rates
Borrowers are asked to indicate the maximum rate they are willing to pay on their loan during the loan request application process. This rate will be displayed on the website in the posting for each loan request. Lenders can either bid the maximum rate indicated by the borrower, or a lower rate that they would be willing to accept on each Note that they purchase. There will typically be multiple bidders on each loan request, and these bidders will compete with each other to fund the loan by offering competitive interest rates. However, bidders will not be made aware of the interest rates offered by other bidders during the auction; they will only see the current going rate on the loan.
During the auction: rate changes
As more lenders bid on a loan, those offering comparatively higher interest rates may be outbid, and will therefore not be sold a Note at the end of the bidding period. Placing a bid commits a lender to purchase a Note if they are a winning bidder, but there is no guarantee that a lender will be able to purchase a Note (simply because he or she has placed a bid on a loan). By allowing lender members to competitively bid on loan requests, borrower interest rates may be bid down from the maximum rate they indicated they were willing to pay in their loan request. There is no guarantee, however, that the rate will be bid down.
When bids have been placed at a given interest rate and equal (in aggregate) the full value of the loan amount requested, the next bidder must offer an interest rate at least 0.05% lower than the standing rate. Bids at the higher interest rate would then be knocked out (outbid) from the auction, to the extent that the value of the lower bids match the value of the higher bids. Relatively higher bids are knocked out of the auction in reverse chronological order (i.e., the latest bidders are knocked out first).
The loan auction: an example
For example, if a $20,000 loan is listed at 20.0% and 10 lender members have each bid $2,000 at 20.0% by the end of the bidding period, the loan will be for $20,000 at a 20.0% interest rate. However, if an 11th bidder came in before the auction end, that bid would require a 19.95% interest or a lower rate. If the auction ended and the 11th bidder had bid $2,000, the loan would still be at 20.0%; but the last bid at 20.0% would be knocked out of the auction (i.e., would no longer be a winning bid), unless another bid was made by the bidder at 19.95% or lower. In this circumstance, the 11th bidder would receive a higher interest rate (20.0% rather than 19.95%) than initially indicated in the bid.
Lenders may also be considered partially winning bidders at the end of a bidding period. For example, if the 11th bidder had bid $1,000 instead of $2,000, the last bidder who had bid $2,000 at 20.0% would become a partially winning bidder, because half of his or her original bid would be counted toward the final value of the borrower loan. This bidder would then purchase a Note from People Capital with a principal value of $1,000, rather than $2,000.
Rates and winning lenders
Lenders indicate the minimum interest rate they are willing to receive on their Notes when they make bids, so the rate they will receive if they become winning bidders on a loan may be above, but cannot be below, the rate they indicated in their bid. For example, if a $10,000 loan is listed at 10.0% and one lender member bids $5,000 at 10.0%, a second bids $3,000 at 9.0% and a third bids $2,000 at 8.0%, the loan would be at 10.0%.
In order for the interest rate on a borrower loan to be bid down from the rate initially indicated by the borrower, bids must be made on the loan request in an aggregate amount equal to at least 100 percent of the value of the request.
Other loan outcomes
If by the end of the bidding period a borrower loan does not receive bids totaling at least 100 percent of the amount requested, or if the borrower declines the loan, or if People Capital cancels the loan for any reason, the posting expires and no loan is funded to the borrower. Borrowers may post a new loan request on our platform.
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How much money can I lend?
You can bid as little as $1,000 per loan or as much as the total loan amount (in increments of $500). The competitive marketplace and other bids will determine what percentage of your bids, if any, will be "winning" and made a part of the loan and subsequent sale. We also strongly suggest that you diversify your bids by making many smaller bids instead of a few large ones.
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Does People Capital guarantee that borrowers will pay loans?
No. Neither People Capital nor its affiliates guarantees that any loan payments will be made by borrowers.
People Capital acts solely as the loan facilitator, originator and servicer. All loans are unsecured — much like a traditional credit card. As such, there is risk involved in lending. Therefore, People Capital suggests that lenders search out borrowers with profiles and backgrounds that will be in line with the amount of risk they are willing to take. We also suggest that lenders diversify bids by making many smaller bids instead of a few large ones.
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What is a co-borrower?
A co-borrower is a co-signer who is individually and jointly liable for your loan. Since they are legally obligated in the loan repayments, 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 at least the
in the state of his/her residence,
a citizen and resident of the United States, have a valid Social Security number and have a of C+ or better.
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Is my lending account insured by the FDIC?
Yes. People Capital keeps lender money in a designated FBO account and manages it in accordance to the FDIC. As a result, each lender's account is insured against loss for up to $250,000 per current FDIC rules and regulations.
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Do I get any interest on the money in my People Capital account?
No. Your money is held by People Capital on your behalf in a non-interest bearing bank account.
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What types of loans can I bid on?
All loans are unsecured and are available for terms of between 2 years and 15 years.
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 (two to five years) are based on the student's current year of enrollment. Students requesting this type of loan must apply for a minimum of $1000.
- 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 $3000.
- 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 three years. Students requesting this type of loan must apply for a minimum of loan amount of $1000.
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What types of lender fees are associated with the loans?
Lenders are charged a monthly servicing fee, which varies depending on the
of the borrower (with a minimum fee of $5).
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Are there any late fees paid by borrowers in the event they are late?
Yes. In the event that a loan is greater than 15 days late, People Capital will collect a late fee from the borrower. These fees are not distributed to the lenders.
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How does your identity verification and fraud system work?
People Capital submits your personal data to our partner databases and requires each member to verify their identity by answering a series of questions. Information is also submitted to check for known criminals, terrorists, money launderers or other flagged individuals.
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How do I know what rate to use when I bid?
Borrowers are required to provide the maximum rate they wish to pay on their loan during the loan request application. There are also limits to the maximum rate set by each state. The lower your bid, the more likely it will be "winning" as others will also be bidding on the same loan and may "outbid" you by placing lower bidding rates. You should note that the "final" interest rate you received is the maximum interest rate of all the winning bids.
Lenders must assess the level of risk they want to take and bid on loans accordingly.
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What rate will I receive if my bid is successful?
The "final" interest rate is the highest interest rate of all the winning bids.
Lenders indicate the minimum interest rate they are willing to receive on their Notes when they make bids. Consequently, the rate winning bidders receive on a loan may be above, but cannot be below, the rate they indicated in their bid. For example, if a $10,000 loan is listed at 10.0% and one lender member bids $5,000 at 10.0%, a second bids $3,000 at 9.0% and a third bids $2,000 at 8.0%, the loan would be at 10.0%.
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What if I bid on a loan but want to cancel it?
You may not cancel or retract a bid once it is made. Once you bid on a loan, you are committed to purchase that part of the loan in the event your bid is "winning" and the loan is .
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Does bidding impact my available funds balance?
Yes. Each time you place a bid, that amount is placed on hold until the bid is either "outbid" or canceled. If your bid is "winning" and the loan is , that amount will be retained by People Capital for your part of the loan.
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What happens if a borrower pays late on one of my loans?
If a borrower becomes more than 15 days late, the borrower will be charged a late fee. If that loan continues to be delinquent, they will also be charged a late fee after 45 days, 75 days, and 105 days. Once the loan goes past 120 days delinquent it will be considered in default and may be sold to a debt purchaser. If the loan payment becomes 60 days late, People Capital will also report this event to all consumer credit reporting agencies. In addition, each time a borrower's automated bank account debit fails, which may be due to insufficient funds or a closed or frozen bank account, they will be charged a failed payment fee.
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If there is a co-borrower, at what time would People Capital debit his/her account?
If we are unable to debit the borrower's account on the due date and two subsequent days (on the 9th and 19th late days), People Capital will then attempt to
debit the amount, and all unpaid late and failed payment fees, from the co-borrower's bank account on the 26th late day. Once we are successful in the collection
of the monthly payment, we will once again continue to debit the borrower's account at least three times before going back to the co-borrower's bank account in
subsequent months.
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What happens if my borrower defaults on paying back my loan?
After 4 months of delinquency, the loan will be considered in default and may be sold to a debt purchaser. The default will be reported to the consumer credit
reporting agencies and will remain on your borrower's credit report for up to 7 years. The borrower will still be legally liable for the debt and will have formal
legal actions taken by the debt holder in the event that they can't make a payment arrangement. Please note that student loans are generally not dischargeable in bankruptcy.
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