Toronto-based goPeer Corp. has launched a digital lending platform that gives borrowers a new avenue of credit — and allows investors to build their portfolios outside of traditional stocks and bonds.
The new peer-to-peer platform connects creditworthy Canadians who are looking to borrow with others who are looking to invest in consumer loans as an asset class.
“We’ve realized that do-it-yourself investors are really looking to build a diversified portfolio but they don’t really have many options outside of stocks,” said Marc-Antoine Caya, co-founder and CEO of goPeer, in an interview.
goPeer serves the near prime to prime plus segment of the credit market. To be eligible to participate on the platform, borrowers must have a minimum credit score of 600, a minimum credit history of 36 months and a debt-to-income ratio below 35%, in addition to meeting other criteria.
Borrowers can apply for loans of between $1,000 and $25,000 with three- to five-year terms. Interest rates on loans range from 7.5% to 31.5%.
Investors on goPeer are asked a series of know-your-client (KYC) questions and assigned a risk tolerance. They can then view goPeer’s loan marketplace, which lists borrowers’ loan-related details, such as their credit rating, income, location and interest rate.
An investor’s money is used to purchase payment-dependent notes in $10 increments. These notes are issued by Peer Capital Corp. and privately placed by Peer Securities Corp., a registered exempt market dealer. The notes are dependent for payment from loans originating from goPeer.
Investors can build their portfolios on the platform in two ways: they can pick and choose which loans to invest in or they can use goPeer’s auto-invest tool.
For example, an investor with $10,000 could decide to invest $1,000 in 10 different loans available on the goPeer marketplace. In some cases, an investor may receive a warning about investing in a particularly risky loan depending on their assigned risk tolerance.
Using the auto-invest option, goPeer creates an automatically diversified portfolio of loans in which an investor could place the $10,000.
goPeer charges a 1.5% annual service fee on the loans, which is deducted from the loan repayments.
In terms of returns, investors are paid 100% of the principal and interest on the loans, minus the 1.5% fee. goPeer has the objective of providing investors in diversified portfolios with a high single-digit (8%–9%) net return, after fees and defaults, Caya said.
goPeer received regulatory approval from the Ontario Securities Commission (OSC) in January 2020.