LendingKarma Frequently Asked Questions
- What is LendingKarma?
- Why Person-to-Person Lending?
- Why LendingKarma?
- OK I’m convinced. How do I use your service?
- Does LendingKarma report to the credit agencies like Equifax, TransUnion, and Experian?
- Who pays for the service? The borrower or the lender?
- How long does it take to set up a loan?
- I signed up, created my loan, and purchased LendingKarma (Basic, Premium, etc) when do I get the money?
- Is your Promissory Note a legal document?
- Does LendingKarma support secured and unsecured loans?
- How many borrowers or lenders can LendingKarma manage?
- How do I set up email payment reminders for my borrower(s) or lender(s)?
- I've "finalized" my loan and now I need to make a change! Help!
- I've made a mistake recording a payment and would like to correct/remove the payment
- How does LendingKarma use the information I enter?
- How is interest calculated on LendingKarma's loans?
- If there are late fees due and an overpayment is made how is the overpayment handled?
- I just purchased a blank loan form. How do I download my form?
- I'm trying to use your service to create a loan but it says my email is already in use
- Are LendingKarma's prices one time fees or are they ongoing?
- My loan hasn't had a payment in 5 months but it's not adding interest or late fees... what is going on?
1. General Questions
2. Questions About How LendingKarma Products Work
1. General Questions
What is LendingKarma?
LendingKarma is an online service that helps people lend money to the people they already know, also known as person-to-person lending. Lenders love us because we help formalize loan agreements, calculate payments, track and record payments, and send out friendly reminders to borrowers. Borrowers love us because we make it easier for them to approach potential lenders in their social circle, by helping them present a good proposal.
Why Person-to-Person Lending?
Person-to-person lending works because when you know someone personally, you know whether they can pay you back. A person sitting behind the desk at a bank or at a credit agency isn’t privy to the same information. They may not realize that your friend fell behind his payments because he had to care for an ailing parent. Or, that your sister’s ex-husband ran up their joint credit card bills and ruined her credit. At the end of the day, you know their specific situation, and you can help them out.
The first step to ensuring a successful person-to-person loan is to clearly define the terms of the loan in writing. This helps protect your relationship and your money. Remember, you’ll also want to include in the loan agreement, all terms, expected repayment schedule and interest rates. LendingKarma offers standard loan agreement templates to help you formalize your agreement and also helps you to calculate payments based on an agreed-upon interest rate. LendingKarma also offers a loan payment tracker product that helps lenders and borrowers track and view those payments. For lenders, LendingKarma provides a way to record these payments and keeps borrowers on track by sending them friendly reminders. LendingKarma’s payment tracker is flexible enough to adjust along with any changes in your repayment schedule. Want to pay down your loan faster? Need to figure out what to do with an underpayment? Received a late payment? LendingKarma’s payment tracker will help with all of these scenarios and keep things on track with a high level of transparency for all parties.
OK I’m convinced. How do I use your service?
You can get started by visiting our home page. From there you’ll be asked a series of questions that will guide you through the 4–step loan creation process. Once you create a loan agreement and have finalized the terms, you can print out the document and sign it. You can also optionally use the LendingKarma payment tracker to keep track of your loan all the way through repayment. If you choose not to use the payment tracker you can also track payments received using the payment schedule in the appendix of your Promissory Note. You can edit your loan agreement any time provided you register with LendingKarma.
Does LendingKarma report to the credit agencies like Equifax, TransUnion, and Experian?
No. Since LendingKarma does not offer payment processing services we are unable to any information regarding loans created and tracked through our system.
Who pays for the service? The borrower or the lender?
Either the lender or the borrower can pay for LendingKarma's Basic or Premium service for their loan. It's up to the borrower and the lender to decide who is responsible for making the purchase.
How long does it take to set up a loan?
It depends. If you know all the information, like the loan amount, interest rates, the parties in the loan, addresses, etc. then you can literally go from nothing to having a completed document ready for signing in less than 5 minutes. Even if you don't know all of the information it's pretty easy to create the initial loan and then invite other loan participants to collaborate and help complete the information required to finish setting up your loan.
I signed up, created my loan, and purchased LendingKarma (Basic, Premium, etc) when do I get the money?
As much as we love facilitating lending and borrowing, LendingKarma is not a bank or lending institution.
2. Questions About How LendingKarma Products Work
Is your Promissory Note a legal document?
Yes, but the question is if it's suitable for your needs. The LendingKarma Promissory Note was drafted by attorneys as a general purpose promissory note. As we state in our terms of service we are not a law firm and cannot give legal advice, therefore we cannot guarantee that our note will be suitable for your situation. We regularly have our attorneys review our note template to update it with any necessary changes. You can also add any special provisions or clauses that you or your attorney deem necessary to your situation.
Does LendingKarma support secured and unsecured loans?
Yes. LendingKarma supports both types of loans. If you want to secure your loan with collateral, LendingKarma allows you to input information about the collateral so that it gets included in your Note. If you are creating a secured loan, you may want to consider filing a UCC form to record the security with your state. To learn more about the loan types LendingKarma supports as well as more information on UCC forms see our loan education center.
How many borrowers or lenders can LendingKarma manage?
LendingKarma has no limit for the number of lenders or borrowers that may participate in a loan. The service is able to document and track a loan with numerous parties on either side of the loan. The payment tracking tool however does not allow for explicitly connecting a payment to a given borrower or lender. You can however record more than one payment received per scheduled loan payment, for example if there are 3 borrowers in a loan and the monthly payment for the loan is $300, you can record 3 different payments of $100 that represent each borrower’s payment for the month.
How do I set up email payment reminders for my borrower(s) or lender(s)?
You can either invite the other parties in your loan to sign up at which time they can setup payment reminders or you can setup reminders directly on their behalf by visiting the "Communication Center" for you loan. You can find that link in the bottom left of your loan overview page.
I've "finalized" my loan and now I need to make a change! Help!
If you're within the 30 day editing window for your loan you'll see a link in "Step 3" of your loan's overview page titled "Reopen loan for editing". You can click on that link and your loan will be reopened for editing. Once you've finished making your changes you'll need to finalize your loan again to get the non-draft, final version of your PDF document.
I've made a mistake recording a payment and would like to correct/remove the payment
If you'd like to "redo" or "undo" a recorded payment for any reason you can do so by visiting you loan's "Loan Payments" tab and clicking on the "Revert payment X" link in the "Loan Payment Ledger" section of your loan.
How does LendingKarma use the information I enter?
How is interest calculated on LendingKarma's loans?
LendingKarma uses simple interest for all lump sum loans and for extra interest accrual before repayment begins on periodic loans (if applicable). For simple interest calculations we use 365 days in a year for the calculation.
For periodic loans we use the standard amortization formula to calculate loan payment amounts
P = iA / (1 − (1+i)^-N)
P = The payment amount
i = The interest rate per period, where period is defined as a month, bi-monthly, annually, etc
A = The loan amount including any extra interest accrued before repayment
N = The total number of payments for the entire loan
If there are late fees due and an overpayment is made how is the overpayment handled?
If a loan has existing late fees due from previous late payments or a late fee due on the current payment and an overpayment is made, the overpayment is first applied to all outstanding late fees and then any leftover overpayment is then applied to the loan in whatever way was chosen when the loan was set up.
I just purchased a blank loan form. How do I download my form?
After you've made your purchase you are taken to a post purchase "thank you" page that will contain a link to download your purchased blank form(s). If you find that you need to download the form again at a later date then you can simply sign in to your LendingKarma account and in your purchase history you will find a link to download your blank form. You can find your purchase history by clicking on the "account" link at the top of the site after you've signed in to your account.
I'm trying to use your service to create a loan but it says my email is already in use
If you see this message from our site it means that you already have an account with us. When you created your first loan we sent you a welcome email with a temporary password so that you can access the site on subsequent visits. If you still have that email you can simply sign in with that password and then create a new loan if you wish. If you are unable to find the welcome email you can simply reset your password by visiting our password reset page.
Are LendingKarma's prices one time fees or are they ongoing?
LendingKarma's form products, LendingKarma Basic, and LendingKarma Premium all require a one time payment for use of the service. In the case on LendingKarma Basic and Premium, the price is for one time fee for the life of the loan.'
My loan hasn't had a payment in 5 months but it's not adding interest or late fees... what is going on?
LendingKarma's payment tracking system does not act in "real time" like a bank's loan tracking tool would. You need to actively record payments for things like late fees, underpayments, and overpayments to be recognized. For example late fees are recognized on late payments based on the date entered for when the payment was received. This allows you to record on time payments for any loan in the past as well as record a recent payment after its due date, since many times a payment has been received but just not yet recorded.