For today’s nearly 20 million American university students it is more expensive than ever to attend college or a graduate school program. And this year has been especially tough on students.
Greennote is young but promising P2P lending platform that specializes in education loans. Imagine Prosper meets VirginMoney meets Kiva: First a student verifies that he will be attending school and creates a borrower profile with an inspiring story of how a loan will support his education. Next, it is the student’s responsibility to reach out to his family, peers, and social network for the funds (even though there is also an option to solicit funds from the Greennote network that includes investors interested in lending to students with inspiring profiles). Lenders can invest amounts as small as $100 towards the student’s tuition, room and board, and other educational expenses. Once the student has raised at least $1000, Greennote proceeds with the process of collecting the funds, formalizing them all into one loan, and creating the legal binding contract.
The creators of Greennote have tailored their platform to the needs of students. The interest rate on all Greennote loans is a fixed 6.8 percent, much lower than most students will find from any private financial institution (which can range 8.5 to 20 percent). Loan repayment s can be deferred for up to five years while the borrower is at school, and after graduation there is a six month grace period until the monthly repayments begin. No credit check or citizenship is required. Additionally, schools can join in supporting students financially by offering loans through Greennote.
Between the fact that the number of students attending universities is only going to grow in the future and the fact that school tuition has been increasing at a rate higher than inflation, it seems that Greennote is operating in a promising niche market. Well-tailored services with a specific focus may represent the next version of P2P lending. Diverse and smaller P2P platforms that target specific needs can help bring more transparency and an even more direct connection for the appropriate borrowers and lenders. We will have to follow Greennote as it grows to see how its development unfolds.
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