After the radio interview with Tony Delroy a few days ago, I’ve had an inordinate number of requests for information on social lending and microfinancing sites. Particularly Australian p2p banks. Remember a bank holds money that the community members have each – for example, salaries, or savings. Then the bank manager takes the community money and decides who to give loans to – back to a community member. Peer to peer loans (many members providing parts of one loan) simply disintermediates the aggregator/bank manager. Bypasses the middle man – the community members decide who they are going to lend the money to, themselves. Sort of an eBay of loans but only if you consider reputation and trust. Otherwise its lots of people bidding to provide you with money.
I’ve blogged on peer to peer banks since 2006 or so, but here’s the latest list I have:
- iGrin - Australia‘s p2p loans – doesn’t look very social but it is still social finance
Kiss me Virgin! Cute.
- Lending Hub – Australian
- Fosik - Australian peer to peer lending
- Peermint launching in Australia
- Prosper.com – waiting to upgrade to SEC.
- Zopa.com from UK
- Peer-lend.com
- Pertuity Direct, which is launching an SEC-registered mutual fund that invests in person-to-person loans.
- Lending Club, which recently registered with the SEC to create a secondary market for its loans, has been signing up twice as many lenders each week than it was last spring, and new loan originations are up about 40% over year-ago levels,
- Loanio - US based
NOT Social finance but still a social network around finance
- Mozo in Australia Rank and review banks
Hope that helps – I gave a presentation on social lending a few years ago – heartening to see most of the banks moving onto SEC accreditation.
Peer to peer lending in 200 million member Facebook (8 million Australians are members). That’s a reasonable size bank right there.
I’m keeping an eye on YadYap - wouldn’t be surprised if they come up with a Twitter p2p loans solution.
FiLife in conjunction with Wall Street Journal have these great tips:
Whether you’re a borrower or a lender, find the best P2P site by following these tips:
If you want to borrow money:
- Check the longevity. See how long a site has been in business. While a company’s founding date is not a measure of future performance, you’ll at least see which ones have established a track record.
- Determine the specialty. Before you choose a P2P site, see which ones focus on your needs. For example, it you’re looking to convert your student loans to one with a lower interest rate, two sites now specialize in education debt— Fynanz.com and CollegeDegreeFund.com.
- Measure client satisfaction. One way to do this is to check independent online chat groups and read the praise and complaints. You can do this by typing the P2P site into Google + “forum.”
- Know the terms. Read the site’s frequently asked questions (FAQ) to understand the rules, fees and risks—minimize disappointment.
- Verify the score. Check the P2P’s credit-score cutoff point. Some sites use 640 as a minimum. Only consider sites where your credit score is higher than the one used. Doing so will make you more attractive to lenders. You can use the site if your score is lower, but you will be designated as a “high risk” borrower.
If you want to lend money:
- Do your due diligence. Check the site’s longevity, client satisfaction and bank the site uses (see above).
- Understand the risks. Most P2P sites explain the risks you face as a lender and what the site will and won’t due if a borrower is late paying, does not pay or defaults.
- Consider making several small loans rather than one large one. This strategy will help you diversity your risk and improves the odds of higher returns, since you’ll likely hold many loans with different rates rather than just one.
- Vet the borrower. Like eBay, many sites let you see buyer information and even contact the borrower to learn more about the individual or loan need. Consider contacting borrowers and asking for more information about their need for the loan and how they plan to repay it. You will, of course, be at the mercy of whatever they tell you, but banks have no guarantee of repayment either. Banks reduce risk by making lots of loans and lending only what they think they can afford to lose if a borrower defaults.
If you don’t want to pay back your loan, consider KickStarter for more creative solutions. I love the first one there – not only is Allison Weiss 256% funded (yep, that’s OVER funded), she also gives away cool prizes to those who fund her next EP. Such as a song written about them.
Finally, WiseClerk is the blog/forum I have been following for about a year now – always interesting news in both peer to peer banking and peer to peer mobile payment transfers.