Student loans have left countless millennials struggling to pay their monthly bills. On top of predatory interest rates and the difficulty of obtaining a well-paying job soon after college, student loan debt has become one of the biggest things holding back our country’s young labor force from fully participating in the economy.

Thankfully, in our constantly innovative tech environment, a lot of startup companies have popped in the past decade to try and tackle the national epidemic of student loan debt. You’ve certainly heard of crowdfunding, for example, which refers to raising funds from a large pool of people – typically over the internet. There have also been a ton of new peer-to-peer lending platforms, where people can borrow amongst themselves.

One of the biggest (and most unique) new companies working in the online lending space is Loanable – a platform that brings together crowdfunding and peer-to-peer lending, but with a twist.

This system, which just launched in October of this year, is designed specifically for loans from friends and families. Loanable is an innovative way to get a low-interest loan from multiple friends and family members, without of lot of the awkwardness and tension that’s typically involved with borrowing from people you know.

According to Bernard Worth, who created Loanable along with co-founder Justin Straight, there is a whopping $1.3 trillion in American student loan debt. All those installment payments, combined with the crushing mental weight of knowing you will be making them for up to a decade, are keeping millennials from pursuing some of life’s major events and milestones.

The founders of Loanable were inspired by this very problem: what if people could save thousands of dollars on student loan interest rates by borrowing from friends and family instead of big banks?

How Does Loanable Work?

Loanable takes the age-old process of asking friends and family members for money, and formalizes it – bringing it into the 21st century as well.

While its two founders originally came up with the idea for Loanable as a way for student borrowers to refinance overpriced loans through their network of friends and family, the loans don’t have to be related to student loans.

This platform will set you up with a formalized lending agreement between the borrower and however many friends and family decide to participate – and the loan can be for pretty much any purpose.

It works like this: You create a Friends and Family Crowdlending (FFC) network on the Loanable website. Once you’ve settled on exactly how much you need to borrow, you can then parcel that amount up into smaller loan agreements that the members of your FFC can sign up for.

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If you need $8,000 to refinance your remaining student debt, for example, you can crowdfund from 12 friends and family members using eight individual loans worth $800.00.

The friends and family loan set-up process is pretty straightforward. You simply need to enter some information:

  • The full amount of the loan
  • Each lender’s name, address and email
  • The borrower’s name, address and email
  • The interest rate – which is usually between 2% and 10% for friends and family loans
  • The loan term (normally 36 months)
  • A designated late fee
  • The start and end dates of the lending schedule

The sign-up process is easy, and there is a useful built-in calculator that helps you do the loan planning. Once you finalize the terms of the loan, you will have a fully legal loan agreement ready to send to your network.

The members of your FFC network will receive the invitation to agree to the crowdfunded loan via email, but they have a chance to negotiate the final terms before you both sign the final agreement.

As for the monthly payments, Loanable has teamed up with Dwolla so that regular loan payments are made automatically from the borrower’s bank account to the lenders’ accounts – that way late payments are more easily avoided. On top of that, your friends and family won’t have to go out of their way to remind you to pay them back.

How Much Does It Cost?

Depending on how many loans you will be taking out using Loanable’s platform, the annual prices are: $14.99 for one per year, $49.99 for as many as 20 loans, $74.99 for up to 50, and for unlimited loans you can pay $149.99.

What are the Risks and Benefits?

As with any lending program, there are risks for both the borrower and lender. With Loanable, the main risk is that you sour relationships with your friends and family – mixing money with personal relationships is always a risky gamble. If you might struggle to make the loan payments to your FFC network, maybe you should re-think a Loanable loan.

As for the benefits:

  • Automatic payments – no pestering the borrow for money
  • Formal, legal agreement that can be used in dispute resolution
  • No credit scores or credit histories are analyzed for these loans
  • Low interest rates and fees
  • A less awkward way to ask for a loan