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Wednesday
Mar182009

First step of the Transcapitalist P2P Fund complete

Today I invested $250 with Pertuity Direct, a recent entry to the social lending marketplace. This is the first step in a plan to invest $1,000 total across 4 different p2p lending platforms to compare the experiences and returns. I'll update as the fund matures and share my experience with the hope of informing p2p newbies interested in entering the space and shopping among the services currently available.

What is the Pertuity Direct model?

The company takes a different approach to social lending (I use the term "social lending" rather than "p2p lending" consciously because it better describes their model and its the term that they use). Lenders invest into the National Retail Fund--essentially a p2p mutual fund--which composes all of the loans made through the website.  Through this structure, the Fund's investments are automatically spread out over a large portfolio of loans, providing a level of diversification usually not reached with p2p platforms.

What is my expected return?

Borrowers pay interest rates ranging from 8.9% to 17.9%. As borrowers pay back loans, investors earn returns. Pertuity charges a lending fee of approximately 3.17% 1.63% [Update: the Pertuity Direct team informs me that the rate for lenders is now 1.63%]. The service is too new to have information on default rates or average returns. [Update: The National Retail Fund now has preliminary figures up. The average interest rate is 13.5%]

What do I like so far?

  • High expected returns. 
  • Prime borrowers. The service requires a minimum 660 FICO score, but the average score is more like 740. Expected defaults are low.
  • Incredibly easy. I signed up, had my information confirmed, and invested $250 within 5 minutes. It will take 2-3 days for the loan to be finalized. I didn't have to screen a single borrower.
  • Predictable liquidity. Perpetuity offers the option to withdraw all of your money before the close-out date for a small 2% fee. Most other services require you to commit for the full term of the loan (often 3 years).
  • Full SEC-backing. This site did it right and waited until they had full SEC approval before launching. I feel confident putting my money with such a competent team.

What did I not like?

  • The experience felt distinctly "un-p2p". I went from start to finish without "meeting" a single borrower. The experience was simple and professional (which is good), but it was just like dealing with a normal bank.
  • Poor conveyance of information. Information is hidden within Pertuity Direct's site and that of its partner National Retail Fund. Prosper Lending Review's site helped.
  • $250 minimum investment. This is a sharp contrast to Kiva or Lending Club, where you can start with $25.

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Reader Comments (2)

Given that there already are a variety of pure P2P lending platforms out there, I find Pertuity's model compelling. Browsing through profiles takes time. I like the idea of putting my money into a "savings account" with a higher interest rate. No hassle, better return.

From your post, it's unclear why they would call their model "social lending". They sound like a more efficient bank. I wouldn't hold that against them though. Putting "the experience felt distinctly un-p2p" as a con is a bit like criticizing Walmart for not being more like Etsy - they're different models with different goals. They may be misrepresenting themselves with the hip-sounding "social lending", but I'd have to read more about them to decide.

March 23, 2009 | Unregistered CommenterTim

@Tim. You're right that the Pertuity Direct model is more like a mutual fund than a p2p platform like Prosper. After speaking with their team, I have a much better sense of how they balance the "social lending" aspects with traditional investment options. Some of the confusion comes from their marketing. The "social lending" label made me initially (incorrectly) lump them with the p2p lenders while they are really forging a third way. They have made it clear that their marketing in the future will be towards the mass market and not the p2p niche. The social lending element is retained in the community space where you can learn about the borrowers if you would like and give back "Pertuity Bucks". You can equally as easily ignore this aspect.

April 4, 2009 | Registered CommenterMelody
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