Harmoney has claimed to be the first in the world to use peer-to-peer lending for 'unforeseen hardship' on loans, the company reports. Its Payment Protect offering is a 'repayment waiver' that can protect against unexpected events that can affect loan repayment, such as death, terminal illness, disability or redundancy.
“Peer-to-peer lending is an exciting and innovative way of connecting lenders and borrowers. Borrowers face the risk that a change of circumstance could make it difficult to repay the loan. Harmoney wanted to give borrowers the option of protecting themselves in situations such as losing their job or becoming ill or disabled," Brad Hagstrom, Harmoney joint CEO, says.
The waiver works by facilitating an agreement between borrower and lender. Borrowers pay the monthly costs, while lenders receive fee benefits, however if a genuine claim is made, they must also agree to waive a loan repayment or the full amount.
The agreement is voluntary, as borrowers can choose to purchase cover and lenders have a choice whether to invest in loans with cover.
Hagstrom says the method of delivering 'peace of mind' to customers through peer-to-peer lending is a rival to traditional insurance and borrowing methods, while providing lender returns through interest income, returns and yield enhancement.
“For an individual loan, the waived repayments could be greater than the Payment Protect fee earned. However, across a whole portfolio the fee income and additional interest should outweigh any waived repayments and fee costs,' Hagstrom explains.
Hagstrom also says it will reduce the risk of default as borrowers will not have to worry about making loan repayments in difficult times in their lives, Hagstrom says.
The Financial Markets Authority issued Harmoney the first P2P lending licence in 2014. The company has raised $30 million in working capital, assessed more than $2 billion in loan applications and paid more than $24 million in interest to lenders.