Loan management platform ‘empowers bank of mum and dad’

Credi launched in Australia in April 2017 and aims to help users build, negotiate, share and manage money lent to one another.

The platform, which is free to use for loans under $2,000, does not provide any credit but instead enables parties to manage loans between themselves.

Speaking to Mortgage Business earlier this year, Tim Dean, CEO of Credi, said that the platform was launched after finding that Australians lend in excess of $1.65 billion to each other each year in unprotected, informal loans, a third of which comprises loans for first home buyers.

However, Mr Dean said that relationships can be put under pressure when these informal loans are not paid back. As such, Credi aims to formalise money lending between family and friends by offering loan documentation, negotiation to a legal contract agreement, repayment reminders and ongoing loan management.

The platform also calculates the repayments and the interest, sending out reminder notices and allowing repayments to be modified according to cash received.

Speaking at the time, Mr Dean said: “We want to save relationships from the strain of financial dealings by turning informal agreements into credible, manageable and formal ones by keeping properly completed documentation in a single place as well as looking after repayment schedules and reminders.

“We believe that by looking after reminders, calendaring and contracting on behalf of the lender and borrower, we are removing the most fraught aspects of relationship loans.”

A third of loans for home deposits

He told Mortgage Business that around third of the loans “consummated” on the platform are for home deposits “because they are the big-ticket items, in terms of dollar value”.

The CEO said: "The gap here between the home equity owners and millennials is widening... millennials have a slim chance of getting on the property ladder. From a government perspective, they have pressure to increase the first home buyers allowance, which is a call on tax dollars which they don’t want.

"Alternatively, [millennials] could go to banks, but there is a lot of pressure for lenders to lend responsibly and not stack people with credit. And 20-somethings these days are so credit-averse, it’s ridiculous. It’s hard to find a 25-year-old with a credit card. 

“So, the banks can’t plug that gap other than offering high-cost credit, and the government doesn’t want to plug that gap because otherwise it has to take more tax to redistribute. So, people are looking to their parents… the bank of mum and dad.”

Mr Dean added: “But the problem some parents have is lending their money to their children without guarantees. They might be concerned that their child hasn’t got a job, or they want to protect their wealth for estate planning, or concerned that they might never get that money back for when they need it later in life. That is where we aim to help.”

As well as home loan borrowings, Credi users are reportedly taking to the site to manage loans for renovations, car purchases, rental bonds or emergencies like unexpected medical bills.

Mr Dean added that he hopes the site can also help improve financial literacy, as it could help those first borrowing money understand terms of repayment, interest rates and contracts.

A partner version of the platform is also available for financial professionals to help them manage and administer their clients’ informal loans.

The platform recently announced that it had appointed Andrew Chick, the former chief executive of the Australian and New Zealand arm of the Royal Bank of Scotland (2012–2015), to its advisory board, and Bendigo and Adelaide Bank’s commercial business development manager (BDM), Lara Dowdall, to the role of chief operations officer for Asia & Pacific. 

[Related: Former RBS CEO joins loan management fintech]