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Squirrel promises low rates

Squirrel Money has opened for business and is promising market-beating personal loan rates.

Monday, November 2nd 2015, 6:00AM

by Susan Edmunds

The latest peer-to-peer lender to enter the market launched at the weekend, offering a platform to match willing investors with borrowers.

Four peer-to-peer licenses have been granted but Squirrel is only the second to begin operating, after Harmoney.

Managing director John Bolton said Squirrel was different because it did not have commercial backing that Harmoney has, and is relying solely on retail investors.

Bolton said that would make the process more challenging.

“The retail market tends to be older and still have the hangover from the GFC when the finance companies went under,” he said.

“They see peer-to-peer as the next version of the finance companies so we have a bit of a job to do to build awareness and visibility in the market of what peer-to-peer is. For older people relying on their investments, bank interest rates are so low, if you have $100,000 in the bank you might get $3000 a year.  We expect to get that up to $8000 a year and we are also taking out a significant amount of credit risk.”

Squirrel offers a reserve fund, Loan Shield, paid for with the risk premium borrowers pay.  The fund underwrites credit losses and loan delinquencies.

Bolton said the platform could be expected to deliver some of the lowest personal lending interest rates in the market.  Rates are decided through a contestable bidding system.

Investors would tell Squirrel what interest rate they wanted on their money and the term they wanted to invest for, and would be matched against loan requests.

“Investors bid in the interest rate they want for their money as loans come in they will be cleared against the lowest bids.  It’s a contestable market for interest rates that will deliver a much lower rate,” Bolton said.

The investors proposing the lowest interest return would have their money lent out most quickly.

“Squirrel Money is going to have some of the lowest personal borrowing rates in the market by a reasonable margin but it relies on us getting investors into the system,” he said.

Lower rates for borrowers would mean lower returns for investors but Bolton said they were not taking the same level of credit risk as higher-interest providers and did not have to deal with the same process of choosing which loans to invest in.

“It’s being managed inside the platform through the reserve fund so there is more certainty of return.”

The site is offering indicative rates for investors of two years at 7%, three years at 7.5% and five at 8%.

Squirrel Money charges $250 for unsecured loans and $500 for secured. Bolton said that provided more certainty of return because platforms that charged a percentage of the loan repayments could end up handing investors a big bill when a loan was repaid early.

Bolton said the platform had taken 10 months to build and planning a lot longer.

Tags: Peer to Peer Lending Squirrel

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 ▼3.89 ▲4.05 4.39
ASB Bank Special - ▼3.39 ▲3.55 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 4.14 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.39 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.02 4.09 4.39

Last updated: 22 November 2019 4:35pm

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