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Comment by mcintyre1994 | Hacker News Reader

mcintyre1994

RE number 5, you seem to be mistaken. Those random loans were all repeat borrowers. "I calculated the APRs for these 20 random Zidisha loans, and the average APR for the loans was 25.22%. The Zidisha APRs for these 20 random loans went as high as 49%"..."And that's just for repeat borrowers (by sheer chance, none of the 20 random loans was from a first-time borrower)."

That said this looks like an awesome response. I think you're net good, but I know what happens down the revolving credit pothole, if you're helping people avoid that its fantastic.

One other concern, your fee structure and business model seem to encourage repeat loans, how do you avoid the situation where that goes horribly wrong?

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"One other concern, your fee structure and business model seem to encourage repeat loans, how do you avoid the situation where that goes horribly wrong?"

We do our best to ensure loans do not cause over-indebtedness by starting with very small amounts initially, and increasing credit limits only if high on-time repayment rates are maintained over time. In order to minimize the risk of borrowers taking out local loans in order to repay Zidisha loans, we do not allow credit limit increases if a large percentage of Zidisha loans are repaid in a short period of time.

In my experience, repeat loans have been a vehicle for increasing assets and revenue over time, not for increasing indebtedness. Here are a few among many examples:

http://p2p-microlending-blog.zidisha.org/2014/03/15/spotligh...

http://p2p-microlending-blog.zidisha.org/2014/03/29/spotligh...

http://p2p-microlending-blog.zidisha.org/2014/04/06/an-agele...

Thanks for replying! That seems completely reasonable to me, I think that separates you from evil predatory loans in my mind regardless what issues there may be with your marketing. :)

> We do our best to ensure loans do not cause over-indebtedness by starting with very small amounts initially, and increasing credit limits only if high on-time repayment rates are maintained over time.

Brilliantly, breathtakingly cynical! Charge a bunch of flat up-front fees, then cap loan amounts based on some opaque criteria.

Hi mcintyre1994,

Thanks for noticing that. I am not finding the quote "And that's just for repeat borrowers (by sheer chance, none of the 20 random loans was from a first-time borrower)." in the blog post now.

I did take a look at the borrower profiles that were linked below the photo collage, and the majority of them were indeed first-time loans. These can be identified in that only second and subsequent loans include the link "View previous loans" below the on-time repayment rate displayed in the profile pages.

First paragraph under section 3, "Not Including Borrower Fees in Zidisha's Interest Rates".

I see it now. I believe the blog post author is mistaken though: the majority of the examples he provided were first loans.

I doublechecked and didn't see any mention of a one-time registration fee on any of those 20 loans?

I'll go back and look at the 20 loans with your tip in mind, and recalculate APRs separately for both first-time borrowers and repeat borrowers, and update the post.

Hi modernm,

I see what you mean. This is confusing because our website is programmed to display the registration fee only for applicants who have not yet had a loan disbursed. Once a loan is disbursed, the fee is paid and is no longer displayed in the loan profile page as part of the amount due to be paid by the borrower.

The second and subsequent loans contain a link "View previous loans" under the "On-Time Repayments" record in the right panel. All the loans that do not have that link are first loans.

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