As I was waiting in the dentist’s office a couple days ago, I came across an article in Time magazine about peer-to-peer lending by Jeninne Lee/St. John entitled ”Hey, Buddy, Can You Spare $10,000?” Various Internet-based companies facilitate the process by which the “haves” (people with money) can lend money to the “have nots.”
Not only do these companies allow anyone with some savings to become a lender, but according to most reports, borrowers feel more obligated to make payments when they are borrowing from individuals rather than from banks.
Peer-to-peer lending helps both the lender and the borrower. The lender can usually charge more interest than they would earn by keeping the money in a bank account or CD. The borrow benefits by having access to cash, and with the way banks are tightening credit, having access to cash is something that consumers may be more than willing to pay for.
I’m wondering what other areas of commerce this model can be applied to. Perhaps we can get rid of insurance companies by pooling our money online.
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It will be interesting to see what happens to the number of lenders and borrowers on peer to peer lending sites as money gets cheaper with the Fed cutting rates aggressively.
There’s a new resource for people who want to learn how to lend money on Prosper and Lending Club as investors:
http://LearnPeerLending.com