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

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

TRD 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
(Image by Wolfgang & Hite via Dezeen)

Hudson Yards megadevelopment inspires a new line of sex toys

Cammeby's International Group founder Rubin Schron and, from top: 194-05 67th Avenue, 189-15 73rd Avenue and 64-05 186th Lane (Credit: Google Maps)

Ruby Schron lands $500M refi for sprawling Queens apartment portfolio

Wendy Silverstein (Credit: Getty Images)

Wendy Silverstein, co-head of WeWork’s real-estate fund, is out

Cristiano Moura (Credit: Christie’s Real Estate and iStock)

Viral Instagram post leads to arrest, assault charge for former Christie’s agent

Amazon CEO Jeff Bezos and Hudson Yards (Credit: Getty Images and Wikipedia)

Amazon takes big new office space near Hudson Yards

A&E Real Estate Holdings principal Douglas Eisenberg and the properties (Credit: The Rego Park 18 Portfolio)

Deutsche Bank provided A&E $97M in financing for big Rego Park buy

Billy Macklowe and Key Food at 120 Fifth Avenue in Brooklyn (Credit: Getty Images and Google Maps)

Billy Macklowe looking to break into Brooklyn

From left: Daniel Shirazi, and Robert Khodadadian, with 530 West 25th Street

Feil Organization buys Chelsea office building for $72M

arrow_forward_ios