Low credit score? This startup wants a chunk of your house

Point Digital Finance is backed by Greylock Partners, Andreessen Horowitz and Vikram Pandit

New York /
Dec.December 24, 2015 08:04 AM

A Palo Alto startup backed by the likes of Greylock Partners, Andreessen Horowitz and former Citigroup CEO Vikram Pandit is offering loans in exchange for equity stakes in the homes of would-be borrowers with bad credit.

The firm, Point Digital Finance, is offering cash loans to people who are restricted in their borrowing choices. The price? The borrower’s soul — or at least a piece of their house. The company only deals with borrowers who own at least 25 to 30 percent of their homes.

Point Digital doesn’t collect payments. It’s paid when borrowers sell or refinance their homes. If that doesn’t happen after 10 years though, the arrangement shifts, and the borrower merely owes a normal loan repayment, at 15 percent effective annual interest, Bloomberg reported.

If the borrower can’t pay, Point Digital seize his or her home and collects its due from the proceeds.

“If your home does well, we both do well,” CEO Eddie Lim explained to Bloomberg. “If your home doesn’t do that well, then this was one of the cheapest sources of financing that you could have obtained.”

If this reminds you of the kind of thing that caused the financial crisis, then you have a fair working understanding of what caused the financial crisis.

Sarah Edelman, director of housing policy at the Center for American Progress told Bloomberg that the loans were a risk for borrowers.

“While it may be appealing to get an upfront lump sum of cash, the risk here appears to be that a consumer could end up with a more expensive product with harsher repayment terms than they would with a more conventional loan,” she said. [Bloomberg] — Ariel Stulberg


Related Articles

arrow_forward_ios
Matt Lauer exposes Hamptons estate to the market
Matt Lauer exposes Hamptons estate to the market
Matt Lauer exposes Hamptons estate to the market
 Fredrik Eklund and the property (Getty, Steve Frankel)
Fredrik Eklund lists Bel Air mansion for rent as family moves to “forever home”
Fredrik Eklund lists Bel Air mansion for rent as family moves to “forever home”
Gordon Ramsey and his Lucky Cat restaurant (Lucky Cat)
Gordon Ramsay to open first South Florida restaurant in Miami Beach
Gordon Ramsay to open first South Florida restaurant in Miami Beach
(iStock)
LI rental review board setting standard for local rental permits
LI rental review board setting standard for local rental permits
Mayor Bill de Blasio (Getty, iStock)
Mystery group sues to stop de Blasio from restricting hotel development
Mystery group sues to stop de Blasio from restricting hotel development
KKR chairman Henry Kravis, 30 Hudson Yards and Related Chairman Stephen Ross (Getty)
KKR buys Hudson Yards observation deck for $500M
KKR buys Hudson Yards observation deck for $500M
Newmark Group CEO Howard Lutnick (Getty)
Newmark’s Howard Lutnick has “highly treatable” non-Hodgkin’s lymphoma
Newmark’s Howard Lutnick has “highly treatable” non-Hodgkin’s lymphoma
1 North Moore (Google Maps, StreetEasy)
Tribeca penthouse rents for $85K per month, possibly setting NYC record
Tribeca penthouse rents for $85K per month, possibly setting NYC record
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...