

Show HN: WeFinance: Earn 4% interest by lending to real people with low risk - mayefsky
http://www.wefinance.co/listings

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martey
Why would I use this instead of another service like Lending Club? It looks
like this gives me a lower return (Lending Club's lowest rate of interest
seems to be 6%) with significantly higher risk (it looks like your site does
not offer any assistance with borrowers who default and use Facebook to verify
their identities).

~~~
mayefsky
That's a very fair question. The primary reason is the underlying population
of borrowers is completely different, so your claim that the risks are much
higher on WeFinance is not well founded. Collections agencies on services like
Lending Club fail to successfully collect a large share of the time, and when
they do collect successfully they still charge a large fee. Borrowers on
Lending Club are in general higher risk individuals to begin with for a
variety of reasons (which led those debts to have much higher original
interest than the WeFinance debts, such as large credit card balances). If
WeFinance lenders are many times less likely to default than Lending Club
lenders, they would be lower risk even if we didn't help resolve defaults at
all. (In practice, we're committed to helping lenders and borrowers resolved
problems, and that plus the social ties between lenders and borrowers we
believe will help lower defaults in the first place and resolve them
effectively when defaults do occur.) We've also individually interviewed each
borrower and are confident on the identity verification front, and in fact,
for friends-of-friends lending, having 20 Facebook friends in common with
someone seems like a pretty good verification to me that they are a legitimate
person.

Lending club clearly offers higher interest rates. We believe the risks are
also much larger and in particular are tough for casual investors to navigate
well; this is borne out by the fact that most money invested in Lending Club
comes from institutions, not people.

We think WeFinance is a great fit for lenders who like higher simplicity and
lower risk, and who get some value out of lending to people they are connected
to or who have compelling stories.

~~~
martey
> _If WeFinance lenders are many times less likely to default than Lending
> Club lenders..._

There is no good way for me to evaluate this claim. If you had a page like
[https://www.lendingclub.com/info/demand-and-credit-
profile.a...](https://www.lendingclub.com/info/demand-and-credit-
profile.action) (or any statistics about current loans) it would help.

I haven't signed up for either Lending Club or WeFinance, but it looks like
Lending Club gives me significantly more information about the lenders'
finances. I would rather see a potential lender's credit report than how I am
connected to them on Facebook.

> _In practice, we 're committed to helping lenders and borrowers resolved
> problems..._

Your FAQ states that lenders with loans in default should use "conventional
legal means" because WeFinance "isn't a party to your contract". If there are
other things you do, prospective lenders would probably want to see it.

> _We 've also individually interviewed each borrower and are confident on the
> identity verification front..._

I don't know if this means you have exchanged emails with them, had a phone
call, or met them in person. I don't know if you are using some third-party
service to verify identity, or just verifying that they have a Facebook
profile. In an earlier comment, you said that all borrowers have stable jobs
and good credit histories, but your FAQ explicitly states that you do not
check credit or employment.

It's possible that you're assuming that this site will be used by people
lending money to people that they already know in real life, in which case
most of my concerns above are invalid or irrelevant. I don't think that's
clear from your language here or on the website.

Even if that's the case, you still might want to:

\- use SSL to protect the borrower application at
[http://www.wefinance.co/borrower_interest](http://www.wefinance.co/borrower_interest)
or even the entire site

\- reconsider the name, since searching for "wefinance" on Google brings up
multiple financing companies with the same name.

~~~
mayefsky
Thanks! This is helpful feedback. It's true that our current home page pitch
doesn't heavily emphasize the social connections, which does lead to some of
the questions you've asked, and we can do better on that. Most lending does
indeed come from people you either know in real life or friends-of-friends,
and that's how our marketing is typically focused, which is why most people
have not expressed too much concern about identity issues and the specific
nature of collections arbitration, etc.

I am curious--for the types of borrowers we have (typically young with a
pretty empty credit history outside of a large student loan), are you
interested in seeing the credit report because you think small variations in
that number will be meaningful? Or is it more to have more confidence that
there's not some huge blemish on it? Part of our hypothesis is that in terms
of the former, the range these numbers fall in for these people are not that
meaningful to lenders in terms of evaluating risk levels. But it's true that
if someone's score was 300 points lower than you expected it to be, that would
be worth knowing, and there might be a way to set a minimum credit score or
something else private we could do to help build that confidence without
simply publishing their whole credit report for the world to see, which some
borrowers might resist.

We're adding SSL as soon as this batch closes. I'm confident we can get to a
decent spot on SEO with a little more growth, but it's certainly possible that
won't work and we'll change the name.

Thanks again for the thoughts!

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conradk
This is a nice concept ! It seems like the "natural" thing to do IMO, just
lend from people to people. I'm wondering though: Is such a system legal
everywhere?

~~~
mayefsky
Hey Conrad--it's legal for US residents. (Our payment processor requires a US
address anyway, so we are currently US-limited regardless of laws in specific
other places.) We've done ample research with experienced counsel and are
configured a bit differently than some other peer-to-peer platforms, so we're
confident it's legal everywhere in the US.

~~~
conradk
Thanks for the clear answer and good to hear! Any plans to expand this type of
concept to Europe (or other regions) someday? :-)

~~~
mayefsky
We're still very much in the early stages here in the States but definitely
would love to be able to support Europe and elsewhere eventually!

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dham
Looks pretty cool but why are you running Web Brick?

~~~
mayefsky
@dham, at the scale we're at we're okay with largely default Heroku rails
configuration. Pointers are welcome!

------
fiatjaf
How do you know the risk is low?

~~~
mayefsky
We've personally interviewed all of the borrowers; all the borrowers have
stable career paths and no history of problems paying back debt, and most are
already making monthly payments on their debt--this just helps them lower the
payment. Of course, there is some small chance any one of them could have a
problem, but we believe the odds of default are much lower than the risk of
loss in the stock market or other higher margin lending options. Of course,
part of the point is that you can read their bios and decide for yourself
which ones you believe to be an acceptable risk.

