New app makes loan agreements easier and cheaper

Drawing up a house deposit loan agreement from the bank of mum and dad has become easier with a New Zealand developed app launched only a few months ago.

Tom Aitken founded Amico to calculate and formalise loans between family and friends for just $15, instead of the usual about $2,000 it costs if lawyers are involved.

Launched in New Zealand and Australia simultaneously in February without fanfare and little promotion, Amico has already cracked about $8 million of loan agreements drafted up – a feat Aitken and his business partner are thrilled with. “It just got traction and kept building from there.”

Described as a simple concept, a lender or borrower can use Amico to work out the loan for any purpose, interest and term that suits them in a fully customised agreement.

Aitken says for example, if a borrower can only repay $200 a fortnight off the loan, the Amico calculator can help them work out the loan’s actual end date based off the interest they are being charged.

This then goes into the loan agreement, which is signed by both parties,who are charged a $15 fee by Amico before that.

“Feedback on the app has been positive because it is minimalistic and easy to use. It’s turning good intentions from borrowers and lenders into good agreements,” he says.

Insights into what people are borrowing for and how lenders are helping their friends and family have been fascinating, Aitken says.
Most of the lending, about 65%, has been for house deposits, while the rest has been for renovations, car and business loans and everyday loans to help people get through the cost of living. 

One of the biggest insights is the amount of interest lenders are charging – either none or up to the OCR level of 3.5%. “Lenders are not wanting to profit off their family or friends, but they are not looking to go backwards either,” Aitken says. 

Loans on average are about $70,000-72,000 for terms of three years. “That is just enough for the bank of mum and dad to give a family member an extra bit of help to buy a house, which is quite powerful.”

He says drawing up a loan agreement can take a few minutes or two to three weeks. “Nobody is on the clock, and we are just there to help when everybody is ready.”

The agreements are legally binding and if a borrower defaults, they can be taken to court. Aitken describes the agreements as a safety net based on goodwill.

However, sometimes that goodwill can be stretched because without a binding agreement there can be rows over whether interest was charged and at what rate.

“With Amico’s documentation everything is in black and white about repaying the debt or lending the money, for example.”

He says the beauty of Amico is that it is not a lender of any kind. “That’s probably what separates us from everybody else. Everyone comes pre-matched for Amico to facilitate a loan document. We don’t matchmake or accept lenders who have, say, $50,000 and want to find borrowers.”

A no brainer

The idea for the app started out of curiosity, Aitken says. “It was off the back of my parents, many years ago, lending me about $10,000 to buy my first car. It gave me my first taste of non-peer-to-peer lending.”

His digging into the property sector side of the market revealed in Australia alone there is about $2.9 billion in home lending from the bank of mum and dad to their children to help them get into their first home.”

“It was an absolute no brainer to try and build an app to help facilitate these loans,” he says.

Aitken already had experience in the sector through his first job out of university drawing up documentation for home and commercial loans at one of the big banks. “It was a natural progression; I already had experience around documentation and I just made it into an automated system.”

The app build was quick. It was the prior preparation – design and compliance work – that took 14 months to finish before the launch in February.

Aitken believes the app could the first of its kind globally. It has been built so it is scalable and can be taken into the US or northern hemisphere. “We have designed it in such a way we can literally turn it on in the countries we want to operate in.

Amico will sit down next month with venture capitalists who are interested in doing a seed funding round to get the app established in the northern hemisphere.  

The company is also targeting about 8,000 users of the app over the next 12 months.