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In early December, the APSP announced a partnership with Prosper, a San Francisco-based company that specializes in peer-to-peer lending.
We spoke with Patrick Giambalvo, APSP's vice president of business development, about how this type of financing can help pool and hot tub dealers, the difference between bank and peer lenders, and whether he thinks P2P lending will be a game-changer. (Hint: He thinks it will.)
Pool and spa builders and retailers have been through some tough times in the last eight or 10 years.
That's for sure. Things started going downhill in late 2006, when housing prices peaked then began to fall, and things kept getting worse until the whole U.S. economy fell apart in 2008. That's when everybody saw what was going on, and big banks were on the verge of failing, people lost half their savings in the stock market. Sales slowed to a crawl on luxury items in all categories, and ours was certainly not spared.
Of course, there are people who will buy big-ticket items no matter what the economy is doing, but most people reigned in their spending.
Our members had to sell to homeowners who had been spooked by the big hit their home values took, or by the fear of losing jobs. Even customers that got around all that and did want to buy were shut out by bankers who had gotten really tight with their money. It took a tremendous toll on the industry. There've been ups and downs before, but this was different.
But things have improved now.
Yes, things have certainly gotten much better more recently, but banks are still not lending money the way they used to. And for people without collateral, there's really been no way for them to get money to buy our members' products. Everyone has lost willing buyers who haven't been able to get loans. We've heard that from our members for years, and now we're doing something about it with a tech company that does business a little differently than banks do.
Can you tell us about it?
We've partnered with a company called Prosper to give our members a new and very innovative way to help their customers get financing. It will make selling easier for dealers, and it will put hot tubs and pools within reach of a broader segment of the population. That's really what the APSP is here for. We want everybody who wants one of our products to have a chance to get it.
Basically, Prosper is a company that facilitates peer-to-peer lending by matching people willing to lend money with people looking for loans. It's not a bank. It's a little like crowd sourcing or crowd funding but it's aimed specifically at small borrowers. They deal with loans as low as $2,000 and as high as $35,000, which would include any hot tub and lots of basic pools.
We're very optimistic about it and are going all-out to promote it. I think it's a perfect fit for our dealers.
This comes right on the heels of the marketing program you rolled out this fall in Las Vegas.
That's right. This fall we launched a new digital marketing campaign called ESCAPE to highlights the benefits of pool and spa ownership. A key aspect of the campaign will be to highlight the importance of working with APSP professionals.
We're really, really excited about the Prosper and ESCAPE programs and think together they can be a game-changer for dealers that get involved.
When will the loan program be up and running?
It already is. Many members are already taking advantage of it. It's really easy to do. They can copy and paste some html we provide to add an active banner ad to their Web site. The banners come in different sizes, with different text and pictures depending on what the dealer wants to emphasize. Again, the link to the financing goes right on the dealer's own website. The customer can then click on the banner and get their loan amount in minutes.
Another way would be to send users directly to apspfinancing.com. But I think having the banner right on your own website looks better and is more likely to get used. If a customer knows they will be able to get a loan this way — even if they end up using a regular bank later on — they're going to be more serious shoppers.
Once a customer clicks on the banner, how does the rest of getting a loan through Prosper work?
Customers first fill in some basic information about address, employment status, income, then see whether they qualify and what rate they can expect without affecting their credit score. And it's really easy. It just takes a few minutes.
If they're qualified, applicants will receive an offer with the interest rate, terms, and monthly payment based on the loan amount and the information they filled in. If they like the terms, they can fill out the rest of the application. That's when Prosper will get employer contact info, Social Security and bank account number for making the deposit. Before this point, there's no formal pull of a credit score. That hard credit pull only happens after an offer has been made.
What happens next?
Well, if the customer wants to proceed, Prosper will generate a "listing," which is a request for a loan. Potential lenders — again, those are peers and not banks — will then look at listings for loan sizes and interest rates they find attractive. The peers are a little like venture capitalists. They are looking at ways to put their money to work outside the usual channels.
Once a listing is made, is it a done deal?
Not necessarily. Sometimes the applicant will need to provide more documentation, like a W-2 or 1099. And the listing still needs to find an investor to commit funds. It's unlikely that a listing won't find an investor, because the applicants are screened by Prosper, but if this does happen the loan won't be made.
What kind of interest rates can borrowers expect?
It depends on the borrower's credit and the size of the loan, but someone with good credit can get a three- or five-year fixed-rate loan for as low as 5.99 percent. Even people without perfect credit can get a loan for a higher interest rate.
This sounds a lot better than asking relatives for money.
That's really what it's like, isn't it? It's like having rich friends and relatives who are eager to lend you money. Prosper just formalizes it, and protects both sides. They won't let a person take more than they can pay off.
We think this has the potential to be a difference-maker in the industry. And we're going to do everything we can to let people know about it.
• Prosper was the first online lending marketplace to launch in the United States • Since 2006 they have helped facilitate over $5 billion dollars in loans • All APSP members can refer their customers • No cost to APSP members • Easy online application • Fixed loan rates • Loans are unsecured — no collateral required• Multiple terms available • Easy fixed monthly payments • Loan sizes from $2,000 to $35,000 • No prepayment penalties • No out-of-pocket costs — origination fees are taken from the loan proceeds
The terms and payment of a Prosper P2P loan, for, say, a hot tub, are a lot like those for a used car. For example, a three-year $10,000 loan with an APR of 5.99 percent would have 36 secured monthly payments of $302. A five-year $10,000 loan with an APR of 9.68 percent APR would have 60 scheduled monthly payments of $201.
Actual rate depends on credit history, income and other factors. Eligibility is not guaranteed, and required that a sufficient number of investors commit funds to the borrowers account and that the borrower meets credit and other conditions. Refer to Borrower Registration Agreement for details. All loans made by WebBank, a Utah-chartered industrial bank, member FDIC.
Who is eligible? The restrictions are minimal. A new Prosper borrower must be over 18, a United States citizen or legal resident, have a credit score of at least 640 (fair to poor), and can't have declared bankruptcy within the last 12 months. That's about it.
Is Prosper a bank? Prosper is not a bank. All loans are funded by WebBank, which is an FDIC-Insured, Utah chartered Industrial Bank.
Once a customer is approved, how long before he or she gets the money? Loan proceeds should be available within one to three business days after a borrower's listing is verified and funded.
Is there a penalty for prepayment? No.
Are there any fees? Borrowers pay an "origination fee," which is a percentage of the amount borrowed, and varies by creditworthiness. The origination fee is typically between 1 and 5 percent of the loan amount, and is taken out of the loan proceeds before the loan is funded into a borrower's bank account. If borrowers make any payments with paper checks, manual check fees may apply. Prosper also charges special circumstance fee of $15 for failed automatic monthly payments, returned checks, and failed bank drafts. Only one of these fees will be charged per monthly payment period. If a monthly payment is late, the borrower may be charged a late fee.
How do the monthly borrower payments work? Prosper will make monthly automatic withdrawals via ACH from the borrower's bank account in the amount of the agreed-upon monthly loan payment or, if the borrower elects, the borrower can make manual payments each month, either by check or one-time ACH transfers.
What states are open for borrowing on Prosper? Prosper is available to borrowers in the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin and Wyoming.
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