Social Lending Networks : Loans Without Banks That Change Lives

Wow, so there is a new thing that I just discovered this evening, called Social Lending.

According to Wikipedia:

Person-to-person lending[peer-to-peer lending] is lending done between individuals circumventing the bank’s traditional role in this process.

Community lending had the advantage that people’s interpersonal relationships fostered increased fiscal responsibility. The risk was that without the benefit of diversification, when something went awry the entire community could suffer.

Lending through banks has benefitted from scale and diversity. By pooling the available money supply and lending it out again, the impact of any one default would be trivial in light of the timely payment of the vast majority of the notes. The downside to this model is that it has introduced greater transaction overhead and removed community loyalty from the equation.

New ventures are seeking to blend traditional practices with new scale economies via online marketplaces. The marketplace serves many functions. Most notably it facilitates bringing borrowers and lenders together. Furthermore, it simplifies what might otherwise be a cumbersome process to properly document and service the resulting loans.

It is hoped not only that these new markets will be more efficient by removing the bank as middleman, but that factors leading to default can be mitigated by reintroducing a social component to the mix.

The leader in this industry is the UK’s Zopa.com, which loans to only UK residents that pass a credit rating requirements. But, the company that seems to be the most altruistic is Kiva.org. Kiva community loans money to poor residents of some of the poorest countries in the world. Helping entrepreneurs worldwide. Such a wondrous deal!

There is also Prosper.com, which can loan you up to 25,000 for your personal use, payable back with whatever % you qualify for.

So, now more than ever, if you have a good idea, in which you wish to cultivate greatness, you may do so by finding people to help you finance your dreams!