finance

When Gucci and Louis Vuitton Handbags Serve as Collateral for Loans

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Say hello to the handbag-backed loan. A company in Hong Kong, Yes Lady Finance Co., provides loans to customers if they’re able to bring in their beloved handbags as collateral.

Yes Lady provides a loan within half an hour at 80% of the bag’s value—as long as it is from Gucci, Chanel, Hermès or Louis Vuitton. Occasionally, a Prada purse will do the trick. Secondhand classic purses and special-edition handbags often retain much of their retail prices.

A customer gets her bag back by repaying the loan at 4% monthly interest within four months. Yes Lady says almost all its clients quickly pay off their loans and reclaim their bags.

The company recently lent about US$20,600 in exchange for a Hermès Birkin bag, but Yes Lady’s purse-backed loans start at about US$200.

This is bizarre, and one of those “markets in everything” phenomena. The best part? Some people try to get away with bringing in fake luxury handbags. You should read the article on how Yes Lady handles those scenarios…

ZestFinance and the Nuances of Modeling Credit Risk

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Pando Daily has a post about Peter Thiel leading a $20 million funding round for a four year old company called ZestFinance. Their goal is to better predict consumer behavior. They model more than 10,000 data points and arrive at more than 70,000 potential signals of consumer behavior. This was the most interesting bit in the article:

Not all signals are obvious, Merrill explains, noting for example that the way a consumer types their name in the credit application – using all lowercase, all uppercase, or correct case – can be a predictor of credit risk. Other seemingly trivial data points include whether an applicant has read a letter on the company’s website and whether the applicant has a pre-paid or post-paid cell phone.

ZestFinance had evolved its business model to that of an underwriting service provider to third-party subprime lenders, “exiting the lending business to avoid the appearance of competition with its new partners.” Will be interesting to see if their methodology gains acceptance in the wider banking sector in the years to come.

Read the entire post here.