In her blog, Casey Slide describes 10 reasons why not to lend money to friends and family. In this blog we look at those same reasons and explain why PeerCover is NOT LIKE Lending Money to Friends & Family:
PeerCover does involve any repayment. Everyone wins if no-one in their Peer Group claims, if someone claims then everyone loses - but only by a small amount.
2. Loans repayment have different priorities for lender and borrower
Since PeerCover does not involve any repayment, this is not an issue. Because your claim is managed through PeerCover we ensure that it is dealt with promptly.
3. It’s Difficult to Ask for the Money Back
With PeerCover you can withdraw your balance at any time. If a peer has successfully claimed then your balance will be less than your original deposit. As long as you have a balance it is at risk but you also get the benefit of the cover (which is a multiple of your balance).
4. It Can Make Family Gatherings Awkward
If your family or friend is reckless and crashes their car, things should be awkward. Peer pressure to be a good driver / look after one's phone etc is a good thing. We believe people will have peers in their Peer Group who they think are reasonable i.e. 'good risks.' even if they have the occasional honest mistakes / genuine accidents.
5. The Borrower Becomes a Servant to the Lender
Upon a successful claim, amounts are gifted i.e. PeerCover not involve any debt between peers.
6. The Borrower May Ask for More
The maximum you can lose is your deposit and you and your fellow peers are at no obligation to drop more into the hat.
7. You Enable (financial problems) Instead of Help Your Friend or Family Member
Morale hazard ("insure & ignore risk") is less problematic for PeerCover compared to insurers. Whilst insurers use fine print, PeerCover's approach is based on fairness. If the Peer Group believe a claimant was reckless, they can deny (by majority vote) that claim.
8. These Types of Loans Don’t Earn Interest
True, your PeerCover deposit doesn't earn interest but by buying less insurance you do save. If you take you insurance saving per deposit, you may find that PeerCover can provide a nice return on equity.
9. You Might Need the Money
With PeerCover you can withdraw your balance at any time.
10. You Could Lose Your Money and Relationship
Addressing each item separately:
- Sure you may lose your deposit but remember with insurance you will lose your premium.
- PeerCover provides independent advice as to whether we think the claim should be paid to reduce disagreements. Further, vetoing PeerCover's recommendation can only occur by majority vote, so it is not on any one peer. We think PeerCover will help strengthen your relationship as your Peers can help you through your claim e.g. who is a good panel, where can I get my phone fixed for a good price.