Pertuity Direct LogoIn a press release today, peer to peer lending site Pertuity Direct took the “beta” label off their site and started accepting new borrowers and lenders.

Pertuity Direct‘s tagline is “mutually responsible banking”, and the “mutual” part of that tagline hints at their method. Rather than having lenders choose the borrowers they wish to finance, lenders invest in an SEC-compliant mutual fund, and Pertuity Direct chooses the borrowers who get funded.

Pertuity Direct Home Page January 2009

Loans are available to borrowers whose credit score is 660 or higher. The rate currently advertised on the home page is 9.6% APR, and the full range of interest rates offered is from 8.9% to 17.9%, although there are no specific details on how rates are set. If approved for a loan, borrowers pay a 1-2% origination fee (depending on their credit score), and if they go late, borrowers will pay failed payment and late payment fees.

On the lending side, the minimum investment is $1,000, and lenders are investing in one of two mutual funds, which have estimated fees of 3.17%. To add a human element to the process, lenders can also contribute Pertuity Bucks (which are free) to a borrower’s loan, reducing the balance that the borrower owes.

From the company’s perspective, this provides the following advantages to their customers over existing P2P lending models:

  • For borrowers, there is complete privacy. Pertuity doesn’t require the public posting of personal credit information or any other information about the borrower’s loan.
  • For lenders, there’s no choosing of loans. An investor has the choice of two mutual funds (organized by National Retail Fund), and that’s it.

Pertuity Direct’s model is a big paradigm shift from what Zopa, Prosper, and Lending Club have done in the past. The mutual fund route lets Pertuity Direct avoid the regulatory pitfalls that have plagued the other sites, but with minimums of $1,000 and annual fees of 3.17%, it will be hard to attract lenders. On the borrowing side, things should be fine if Pertuity can accruately gauge the risk of their borrowers. We look forward to seeing how things progress for this innovative company.