Defynance Review

Defynance Holdings, Inc. is based at 2780 East Fowler Ave, Suite 167, Tampa, Florida, and is led by founder and CEO Farrukh Siddiqui and co-founder Thomas Tellner, who heads risk and data science. Its site lists Techstars Boulder's 2021 class among its press coverage. The stated mission is to eliminate $1 billion of student debt from 25,000 borrowers by 2030. The company has three lines: student loan refinancing, a private investment fund, and a career platform called GROW.

The refinancing product is an income share agreement (ISA). Defynance pays off the customer's student loans, and the customer agrees to share a fixed percentage of income for a set payment term.

Defynance is explicit that this is not a loan: the amount financed is not required to be paid back, there is no interest, and the obligation ends when the term expires whether total payments are less than, equal to, or more than the amount financed. Its illustration is 4% of income for 10 years in exchange for $15,000.

Pricing comes from a proprietary model called PRAIS (Pricing and Risk Algorithm for Income Sharing), which Defynance says uses more than a hundred data points to predict earning potential and returns a quote with several percentage and term combinations.

The published limits are that the share never exceeds 15% of income and the term is never 20 years. There is no minimum credit score, though credit is one input, and no co-signer. Applicants must be US citizens or permanent residents, hold a degree or professional certification from an accredited institution, and currently have a job.

The protections are the strongest part of the offer. Payments pause when income falls below $2,000 a month or after a job loss, nothing compounds during the pause, and the term can be extended by the length of the deferment up to a maximum. A payment cap limits the total, the customer can prepay at any time, and the agreement ends early if the cap is reached.

Defynance also describes term reduction options, a buyout mechanism and a cash back reward on completing the term. A 2020 Defynance post explains the reward as co-ownership: the customer pays 5% of the funded amount at the start to own a share of the agreement, and receives that share of their own payments back at the end of the term. The trade-off it names itself: a customer whose income rises significantly can pay more than a loan would have cost, up to the cap.

The agreement is a binding contract. Defynance pulls a credit report with the applicant's authorization and reports payment performance, positive and negative, to the credit bureaus. Customers must report income and job changes, submit quarterly pay stubs, and go through an annual reconciliation against W-2s, pay stubs and IRS tax transcripts. Defynance tells fund investors it can seek a default judgment if needed.

The Defynance Fund is the funding side. It is a closed-end private fund that invests exclusively in these agreements, open to accredited investors from $25,000 and qualified purchasers from $100,000, with monthly subscriptions, a one-year hold and quarterly distributions afterward.

The fund page reports a 14.66% net return, 0.47% volatility and a 2.22 Sharpe ratio without stating the period. Fees include a sales charge, servicing fees, a management fee and carried interest, with amounts only in the private placement memorandum. The stated raise goal is $5 million.

On Shariah compliance, Defynance has made one statement: a November 2020 blog post says that after gathering an expert opinion on Islamic finance guidelines it made sure the program follows them and is halal. The expert is not named and no opinion, board or certifier is published, so the claim cannot be checked. Several things Defynance does not publish also matter to a borrower: the payment cap multiple, fees, and the minimum and maximum it will finance.