Skip to main content

GraduRates promises healthy returns by providing graduate loans cheaper than the banks

Would you back the nation's graduates to produce a return on your money? A new firm is offering to pay healthy rates of interest if you are willing to risk your money to fund loans direct to graduates.

GraduRates allows students to borrow from a community of lenders who are paid a return on the money they lend. It is the latest take on 'peer-to-peer' lending that cuts out banks and matches individual borrowers and lenders directly.  RateSetter and Zopa already do this for individual borrowers and FundingCircle for business.

The theory behind such businesses is that there is a sizable margin that traditional lenders make between the interest they pay depositors and the amount they charge borrowers. Squeezing this margin should be possible so that investors get higher returns and borrowers pay less interest.

Finance options: Those looking for a postgraduate loan can now do so via a new lend-to-save firm

The process carries risks for those lending because borrowers can default. Their money is not protected as it would be in a bank savings account. (See below)

Nonetheless, peer-to-peer lending has become an increasingly popular method of modern financing and the sector was endorsed by Government after it pledged to lend around £30million to small businesses through FundingCircle.

  More... Why people are flocking to lend-to-save and how it works STUDENT FINANCE 2012/13: Your essential guide to help students keep on top of money

Currently, anyone in the UK embarking on a PhD or doctorate can apply for funding through the existing Professional Career and Development Loan (PCDL) service. 

However, since 2011, PCDL loan acceptance rates have fallen to 45 per cent as banks have tightened lending restrictions.

Those looking to finance further study can apply for a PCDL via either Barclays or Co-op Bank - both come with an advertised rate of 9.9 per cent. GraduRates says banks will only select the most creditworthy and high achieving graduates.

The need for wider access to postgraduate funding was outlined in last year’s Higher Education Council report which highlighted the potential damage to the UK’s research and innovation capabilities, if students are put off or denied postgraduate study, due to lack of funding.

GraduRates was founded in 2012 by a former investment banker, Jothan Webb.

He said: ‘Postgraduate education is a necessity for the UK economy if we want to remain innovative and maintain our position as a global leader in innovative business solutions. 

‘By providing students with a greater access to financing at a reasonable rate, we are addressing the funding issues in the current system.

‘In the current low interest rate environment, we can also offer lenders a far better return on their investment than other debt options that are currently available.’

GraduRates is offering investors headline returns of up to nine per cent although in reality these will be slimmer than this. The exact rates depends on their risk appetite and default rates while GraduRates also charges a flat fee for using the service.

Lenders can also choose which category of borrowers they lend to, with a sliding scale of risk from A* to C. The most a lender is exposed to one borrower is £100.

The company said returns to lenders are between 4.5 per cent and 7.5 per cent.

GraduRates charges lenders a flat fee of one per cent a year on funds lent out and charges borrowers a lending fee paid at the inception of the loan.

Funds that are deposited but not yet allocated to borrowers are not subject to a fee and are placed in a segregated account.

Borrowers can borrow up to £25,000 with a target APR of seven per cent.

The loans taken out by students are co-signed by a homeowner, who is required to have contingency funds deposited with GraduRates to minimise risk to those lending.

By looking beyond traditional credit scoring methods and banking metrics, GraduRates says its service aims to ‘provide a better understanding of the true risk profile of candidates, increasing accessibility to students while ensuring greater security for investors.’ 

Offer may be tempting – but beware the lack of protection

The ‘big three’ lend-to-save firms FundingCircle, RateSetter and Zopa have gained in popularity as banks tighten lending criteria for borrowers and reduce rates for savers.

The industry is not regulated. This means savings are not covered by the Financial Services Compensation Scheme, which protects bank deposits of up to £85,000 in the event a providers goes bust.

The peer-to-peer lenders all say they operate a strict credit checking policy - 85 per cent of those who apply for a RateSetter loan, for example, are rejected.

Concerns about the lack of protection has prompted the firms to take action. So far, they have set up a voluntary trade association and are in talks with Treasury officials about possible regulation, although nothing has yet been agreed.

The industry body, the Peer2Peer Finance Association is designed to protect consumers by ensuring a set of minimum standards. Zopa, Funding Circle and RateSetter are the founding – and as yet the only - members.

It’s a self-governing industry body, so does not carry the same weight as regulation by the Financial Conduct Authority. The P2P Finance Association said lenders must have both a strong capital base and a solid plan in place to make sure lenders are repaid if the firm goes bust.

GraduRates says that if it went out of business, any loans made would still stand as the agreements made are between the individual lender and borrower.

On its website, it says: ‘The administrators would take over the task of payment schedules and it is likely that lenders would receive funds as expected. The fees paid by the lenders should cover administration costs.’



Popular posts from this blog

Study Abroad USA, College of Charleston, Popular Courses, Alumni

Thinking for Study Abroad USA. School of Charleston, the wonderful grounds is situated in the actual middle of a verifiable city - Charleston. Get snatched up by the wonderful and customary engineering, beautiful pathways, or look at the advanced steel and glass building which houses the School of Business. The grounds additionally gives students simple admittance to a few major tech organizations like Amazon's CreateSpace, Google, TwitPic, and so on. The school offers students nearby as well as off-grounds convenience going from completely outfitted home lobbies to memorable homes. It is prepared to offer different types of assistance and facilities like clubs, associations, sporting exercises, support administrations, etc. To put it plainly, the school grounds is rising with energy and there will never be a dull second for students at the College of Charleston. Concentrate on Abroad USA is improving and remunerating for your future. The energetic grounds likewise houses various

Best MBA Online Colleges in the USA

“Opportunities never open, instead we create them for us”. Beginning with this amazing saying, let’s unbox today’s knowledge. Love Business and marketing? Want to make a high-paid career in business administration? Well, if yes, then mate, we have got you something amazing to do!   We all imagine an effortless future with a cozy house and a laptop. Well, well! You can make this happen. Today, with this guide, we will be exploring some of the top-notch online MBA universities and institutes in the USA. Let’s get started! Why learn Online MBA from the USA? Access to More Options This online era has given a second chance to children who want to reflect on their careers while managing their hectic schedules. In this, the internet has played a very crucial in rejuvenating schools, institutes, and colleges to give the best education to students across the globe. Graduating with Less Debt Regular classes from high reputed institutes often charge heavy tuition fees. However onl

Sickening moment maskless 'Karen' COUGHS in the face of grocery store customer, then claims she doesn't have to wear a mask because she 'isn't sick'

A woman was captured on camera following a customer through a supermarket as she coughs on her after claiming she does not need a mask because she is not sick.  Video of the incident, which has garnered hundreds of thousands of views on Twitter alone, allegedly took place in a Su per Saver in Lincoln, Nebraska according to Twitter user @davenewworld_2. In it, an unidentified woman was captured dramatically coughing as she smiles saying 'Excuse me! I'm coming through' in the direction of the customer recording her. Scroll down for video An unidentified woman was captured dramatically coughing as she smiles saying 'Excuse me! I'm coming through' in the direction of a woman recording her A woman was captured on camera following a customer as she coughs on her in a supermarket without a mask on claiming she does not need one because she is not sick @chaiteabugz #karen #covid #karens #karensgonewild #karensalert #masks we were just wearing a mask at the store. ¿ o