Loan Guarantees
Fynanz not only provides lenders with a medium to lend
money to students, we also share the risk with the lenders.
We cannot think of a better way to align ourselves with
students and lenders than to fully or partially guarantee
the loan. Our guarantees range from 50% to 100% of the
amount lent and are determined by the FACS Grade for the
loan.
In the event of a borrower default, lenders will be due
guarantee amounts from the
Default Prevention &
Guarantee Fund (Guarantee Fund). The guarantee
percentages, determined by the FACS Grade for the loan, are
outlined in the table below:
| Platinum Honors |
100% |
| Platinum Plus |
90% |
| Gold Honors |
80% |
| Gold Plus |
70% |
| Silver Honors |
60% |
| Silver Plus |
50% |
Guarantee amounts owed to the lender will be equal to a
percentage of the original amount lent less any payments
already received by the lenders in the form of borrower
interest and principal payments or proceeds from a loan
sale in the event of borrower default.
Unlike other people-to-people lending sites, lenders are
not responsible for paying the collection fees related to
curing delinquent loans, but rather the fees associated
with collecting payments greater than 30 days past due are
paid from the Guarantee Fund.
Default Prevention and Guarantee Fund (Guarantee Fund)
As we mentioned before, the Guarantee Fund has been
established to reimburse lenders either partially or fully
in the event of borrower default. In addition, all fees
owed to third party collection agencies will be paid from the Guarantee
Fund as well. We do this to align our interests with lenders'.
The faster we are able to cure the delinquent loan the less we
have to pay out of the Guarantee Fund. On their part, lenders
agree that any late fees assessed will be owed to
the Guarantee Fund. By having the Guarantee Fund pay collection costs,
our interests are aligned with those
of the lender to bring a delinquent borrower current as
soon as possible and avoid potential default.
Fynanz will maintain a minimum of $250,000 in the Guarantee Fund at all times.
Fynanz has arranged for the initial capitalization of $250,000 of the Guarantee Fund from a third
party.
Additional transfers will be made to the Guarantee Fund
from the 1% Guarantee Fee added to the borrower's interest
rate and collected until the borrower has repaid 10% of the
original principal balance of the loan.
If at any time the Guarantee Fund balance is larger than the greater of a)
$250,000, or b) 5% of the guaranteed loan amounts
outstanding, funds exceeding this threshold may be returned to Fynanz.
Fynanz does not assess any fee to administer the Guarantee
Fund.
Please see loan guarantee examples below:
Example 1. Loan Defaults After 1 Year
| 1/8/2008 |
Borrower Takes Out 10 Year Loan
Lender Placed Winning Bid for $200 |
Initial Lender Note
Balance:
Interest Rate:
FACS Grade:
Fynanz Guarantee: |
$200.00
10.00%
Gold Honors
80% ($160.00) |
| 1/9/2009 |
Borrower Enters Loan Repayment
(paying principal & interest) |
Deferred Interest (# years):
Deferred Interest ($)
New Loan Balance:
Monthly Payment: |
1.0
$20.00
$220.00
$2.91 |
| 1/1/2010 |
Borrower Makes 12 Payments for 1 Year |
Interest Payments:
Principal Payments:
Total Payments:
Remaining Loan Balance: |
$21.39
$13.50
$34.89
$206.50 |
| 4/1/2010 |
Borrower Makes No Payments for 3 months and
Defaults |
Proceeds from Loan Sale: |
$20.00 |
| 5/1/2010 |
Lender Receives Amount from Guarantee Fund |
Fynanz Guarantee
Amount:
Less $ Paid to Lender:
Less Loan Sale Proceeds:
Guarantee Owed to Lender |
$160.00
-$34.89
-$20.00
$105.11 |
Let's look at another example, where the loan has been
in repayment for a longer period of time before the
borrower defaults:
Example 2. Loan Defaults After 6 Years
| 1/8/2008 |
Borrower Takes Out 10 Year Loan
Lender Placed Winning Bid for $200 |
Initial Lender Note
Balance:
Interest Rate:
FACS Grade:
Fynanz Guarantee: |
$200.00
10.00%
Gold Honors
80% ($160.00) |
| 1/9/2009 |
Borrower Enters Loan Repayment
(paying principal & interest) |
Deferred Interest (# years):
Deferred Interest ($)
New Loan Balance:
Monthly Payment: |
1.0
$20.00
$220.00
$2.91 |
| 1/1/2014 |
Borrower Makes 72 Payments over 6 Years |
Interest Payments1:
Principal Payments:
Total Payments:
Remaining Loan Balance: |
$98.84
$106.88
$205.72
$113.12 |
| 4/1/2014 |
Borrower Makes No Payments for 3 months and
Defaults |
Proceeds from Loan Sale: |
$20.00 |
| 5/1/2014 |
Lender Does Not Receive Amount From Guarantee
Fund |
Fynanz Guarantee
Amount:
Less $ Paid to Lender:
Guarantee Owed to Lender2 |
$160.00
-$205.72
-$45.72
$0 |
Calculated number have been rounded.
1 Includes payment decrease from removing 1%
Lender Guarantee Fee, which occurs once the borrower
has entered repayment status and paid the current
principal balance down to 90% of the original principal
balance.
2 Fynanz does not owe the lender a
guarantee amount because the lender has already
received interest and principal payments from the
borrower of $205.72, which is greater than the $160
guarantee amount.
