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Fynanz (New York, NY) offers private student loans for higher education, with interest rates section through an auction marketplace. Prospective borrowers may choose a repayment term of 5, 7 or 10 years. (10 year terms not available for loans of $6,500 or less.) Loan amounts range from $2,500 to $20,000 per loan, with a maximum of 4 loans per calendar year (with a minimum 60 day separation between loans) and a maximum of $40,000 per year. The minimum loan amounts may vary by state ($3,000 Georgia, $6,000 Massachusetts, $5,000 Ohio). There is an aggregate limit of $120,000 for undergraduate education and $160,000 for graduate school. Lenders can lend $50 or more in $25 increments. Lenders can bid on individual loans or use "Smart Bids" to bid on multiple listings according to pre-set criteria such as FACS Grade and year of study.

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US citizenship or permanent residency is required. A 640 minimum credit score is required. Proof of enrollment or a tuition bill is required. Students must have a 2.0 or higher GPA in order to obtain a loan. Cosigners are required for freshmen or sophomore students and students not enrolled in a degree-granting program. Juniors and seniors attending a 4-year institution can apply for up to $7,500 per year without a cosigner provided that there is no negative information on their credit report. Either the borrower or the cosigner must have verifiable income and 2 years of continuous job history with no gaps. Borrowers must be 21 years old to apply without a cosigner. There is a cosigner release option after 24 consecutive on-time monthly payments.

Interest rates and fees are based in part on the Fynanz Academic Credit Score (FACS). The six FACS Grades consist of three categories (Silver, Gold and Platinum) with two levels (Plus and Honors). The FACS Grades are based in part on credit history and in part on academic characteristics, such as year in school, GPA, course of study and the profile of the educational institution. For example, borrowers who are closer to graduation have a better FACS Grade. The FACS Grade is based on academic accomplishments and background, not just credit ratings.

Borrower fees include a one-time fee of 2.9% (Platinum), 4.9% (Gold) or 6.9% (Silver) that is added to the loan amount. Interest rates are variable and are pegged to the 1-month LIBOR index plus a margin of 3.5% to 7.9%, with the margin varying according to the FACS Grade and the bidding activity on the site. (The maximum interest rates vary by state from 16% to 36%.) Borrowers are also charged a 1% guarantee fee until the borrower has repaid 10% of the original loan amount. (This typically occurs in months 9 to 29, depending on the term of the loan and the interest rate, assuming loan terms of 5 to 10 years.) There is a failed payment fee of $15. There is a late fee of $15 or 5% of the unpaid installment amount, whichever is greater, for payments that are more than 15 days late. (The late fee may vary by state.) Lenders pay a 1% annual servicing fee deducted from payments. (The servicing fee is deferred when loans are in deferment.)

There is a 30-day borrower remorse period, during which the borrower may cancel the loan by returning the funds and owe nothing, not even interest, fees or penalties. After the 30-day cancellation period the borrower will owe any accrued but unpaid interest and fees. There is no prepayment penalty.

Loan proceeds may be used for tuition, room & board, books & computer, living expenses, travel, study abroad, examination fees and test preparation courses, past-due tuition bills and all other education expenses. Disbursement checks are made copayable to the school.

There is an in-school deferment, with unpaid interest capitalized at repayment. There is, however, a $25 minimum monthly payment. Even during the in-school deferment borrowers must make $25 "good faith" monthly payments. (This will likely reduce the default rate by getting borrowers into the habit of making payments and keeping the site in continual contact with the borrowers.) Borrowers can choose to make even higher payments of the interest that accrues during the in-school period if they wish.

Repayment options include a two-year interest-only option. There is also up to 18 months of forbearance, with no more than one 9-month forbearance period per year. Loans are dischargable in the event of death, total and permanent disability and school closure.

The loans have a partial or full guarantee against borrower default based on the FACS Grade, ranging from 50% for Silver PLUS to 100% for Platinum Honors. (Default is defined as 120-days delinquent.) The guarantee covers only the outstanding principal, but not the accrued but unpaid interest. Borrower payments, delinquencies and defaults are reported to credit reporting agencies.

There is no secondary market for Fynanz loans, meaning that loans are typically held until maturity. However, Fynanz may (but is not required to do so) offer to buy loans in repayment for at least a year at a discount to face value. The purchase price will be at a discount to the par value plus accrued interest, depending on the FACS Grade, loan repayment history and market conditions.

Since Fynanz is a new program, actual default rates are not available. Fynanz expects cumulative default rates, net of the Fynanz guarantee, to range from 0% to 7.5% (0% Platinum Honors, 0.5% Platinum Plus, 1.4% Gold Honors, 2.7% Gold Plus, 4.8% Silver Honors, 7.5% Silver Plus). Actual default rates are likely to vary from these figures.

Fynanz launched the OpenLoan in March 2008. Fynanz loans are currently available to borrowers who reside in 16 states (lenders may be from any state). Fynanz is expect to go national in the next 12 months through a bank partnership.