Mortgage broker Squirrel is set to enter the peer-to-peer lending market enabling them to offer cheaper consumer finance than banks plus a better rate of return for investors, the NZ Herald reports.
retail general manager John Bolton
owns Auckland-based Squirrel Money, setting up a separate arm under the company and just the third business to receive a license from the Financial Markets Authority
to offer the new service.
Peer to peer lending effectively cuts out the bank or finance company via matching people who want to borrow money with those who are prepared to lend it online.
Bolton aims to target consumer lending with up to $30,000 unsecured in loans or between $30,000 and $70,000 with security over their purchase and believes the people interested in the platform will home-owners looking for extra funds for renovations or consolidating debt.
"The reality is the first mortgage market is very competitive - banks can source very cheap money,” says Bolton. “There's no market there for fringe players and the return is not there for investors."
A minimum of $500 would be required for prospective investors or lenders but could see returns of 7 per cent or above – almost twice the amount in earnings compared to leaving money in the bank.