Fynanz, a peer to peer lending platform for student loans, has raised $6.5 million in Series A funding from Draper Fisher Jurvetson, DFJ Gotham Ventures, The Brazos Group, Zelkova Ventures and JBR Media Ventures. This latest round of funding brings the startup’s total funding to over $8 million. Fynanz will use the funding to expand its credit union and student lending marketplace, and for the development of additional lending programs including financial literacy initiatives.
Fynanz, which launched in 2008, applies the peer-to-peer lending model of starups like Prosper to student loans. Students can apply for loans and participants can help fund these loans. Unlike Prosper or other P2P lending sites, Fynanze guarantees each loan. And since they are qualified educational loans, the students can deduct the interest from their taxes once they start paying back. To reduce its risk, the startup looks at other factors in addition to credit scores when evaluating each student borrower, including grade point averages and what school the student is attending.
The loans are co-payable to the school, and Fynanz takes into account tuition and other expenses to make sure students don’t take out more than they actually need. The plus for the student is that loans are offered to students with low interest rates, often 0.60% to 1.0% lower than what a student would get from a bank. Fynanz faces competition from fellow student lending platform GreenNote.