The OpenLoan is a people-to-people private student loan that can pay for all qualified educational expenses including tuition, room and board, books, and other school related costs. Unlike traditional private student loans, borrowers do not apply with a bank, but advertise their request for a loan in an auction marketplace where individual lenders - friends, family, alumni and others, bid competitively to fund the loan.

To apply for an OpenLoan, a borrower posts a loan listing in the marketplace with a desired loan amount and interest rate and lenders bid to fund the loan. Fynanz has created a proprietary underwriting model, FACS, to grade and differentiate loan listings based on the borrower’s academic characteristics.

The participants of an OpenLoan are the borrower, the cosigner, and the lenders. The borrower may be any student enrolled at least half-time at an eligible school and a US resident with a Social Security Number and verifiable income with two years of verifiable job history. If a borrower does not meet the above requirements, they must obtain a cosigner who is required to meet identical requirements, as well as be at least 21 years of age.

Lenders bid to fund borrower’s loans. A lender must be a US resident over the age of 18 with a US bank account and a Social Security Number.

Fynanz is an online auction marketplace that connects borrowers and lenders. Borrowers apply for loans, make specific loan requests, and each listing is assigned to a FACS Grade. Lenders bid on the loan listing. Because lenders competitively bid on the loans, Fynanz may be able to deliver lower interest rates compared to a traditional financial institution. Lenders have the additional security provided by loan guarantees and the satisfaction of assisting their friends and family. Borrowers have increased control over their loans and more control over the terms of their student loans.

A FACS Grade is a designation assigned to each loan listing to help lenders determine the expected risk of default. The FACS Grade is derived from FACS, which Fynanz calculates using a proprietary scoring model to differentiate borrowers and rank the risk of default for a given loan listing. FACS Grades are unique because, unlike many other ratings, FACS takes into account the academic characteristics of a student such as GPA, course of study, school, class standing, and year of study. We believe the FACS Grade provides lenders a better indication of a student borrower’s ability to repay the loan.

Like most private loans, the OpenLoan has variable rates that fluctuate over time. The interest rate of an OpenLoan is the sum of three components - the Base Rate, Margin and Lender Guarantee Fee.

The Base Rate is determined using the 1-Month LIBOR index, or London Interbank Offered Rate, which is adjusted quarterly. The Margin is determined through the competitive bidding process. A 1% Lender Guarantee Fee is added to the interest rate. The Guarantee Fee is earmarked for the Default Prevention & Guarantee Fund, which is established to help protect lenders in case of borrower default. Once the repayment period begins and a borrower has paid 10% of the requested loan amount, the Guarantee Fee will be removed.

Traditional financial institutions have their own lending criteria, overhead and operating expenses, which may not enable them to provide borrowers with more competitive rates. However, Fynanz offers competitive bidding from family, friends, alumni, and others. Fynanz may bid on listings to generate lending activity and facilitate the loan process. Bids placed by Fynanz have the lowest priority, so a lender who bids the same rate as Fynanz will be the “winning bidder.”

Our primary source of revenue is a servicing fee to lenders equal to 1% of the initial loan balance.

Fynanz also charges an upfront fee to the borrower based on the loan’s FACS Grade. This upfront fee is added to the loan balance. A portion of this fee is set aside and deposited in the Default Prevention & Guarantee Fund, a separate fund created to cover defaults. The upfront fee is also used to pay costs for underwriting, verifying and disbursing the loan. Although borrowers are charged a 1% Guarantee Fee for a limited time, it is deposited in the Default Prevention & Guarantee Fund.

Fynanz will electronically send monthly statements summarizing all account activities for to both lenders and borrowers. We will also provide 1099 forms to lenders at the end of each calendar year for earned interest and fees.