ML-Implode News - New Lenders Spring Up to Cater to Subprime Sector

As the economic recovery continues, new entrants see an opportunity to lend at interest rates approaching 10% and sometimes much more. That is a premium above prime loans--those made to borrowers with strong credit scores--but less than what many consumers pay for credit cards and payday loans.
Among firms that recently began originating loans for people with subprime credit is Lending Club, a peer-to-peer platform in which investors pool money to make consumer loans. Microsoft co-founder Paul Allen's firm, Vulcan Ventures, invested $125 million in FreedomPlus, a San Mateo, Calif., lender that opened its doors in mid-February.

FreedomPlus, an offshoot of firm Freedom Financial Network, is targeting about 80 million people with credit scores between 600 and 700. It offers loans up to $35,000, to be repaid over two to five years. Rates range from 7.49% to 36%, with an average of 18% to 20%.

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New Lenders Spring Up to Cater to Subprime Sector