money 2.0? peer-to-peer loans? ebay for no-bank borrowing?
it sounds like a horrific idea but the more i read this article on the bbc technology page the more it started to make sense.
The concept is called social lending and the idea is to introduce people who need money to people who want to lend some – cutting out the middlemen like banks and mortgage companies.
Zopa is a pioneer in this space. For the past two years it has allowed members to borrow and lend on their own terms.
Alison Daniel is an HR Advisor at a magazine publishing company who was looking for a loan to pay her overdraft.
“I looked at my bank and other various banks where I could get a loan and then I heard about Zopa, went on to their online calculator and the rates came up really cheaply so I opted for Zopa,” she said.
The site itself is very easy to use. After both the borrower and the lender have registered, they choose what rate at which they would like to borrow or lend. If the rate they choose corresponds then the site brings them together.
You do feel a connection to the people you are loaning to
But how trustworthy is the site and will lenders get their money back?
James Alexander, CEO of Zopa says they do everything they can to minimise any risk.
“We risk assess, identity and credit check every individual that comes to Zopa,” he said. “So it’s a community of known individuals and what Zopa does is connect these people so they can borrow and lend money on their own terms.”
To minimize risk Zopa will spread your loan among a few borrowers. So if are lending £500 ($993) then your money will automatically go to 50 different people.
i must admit the concept of cutting out the necessity of banks from your finacial dealings is one that appeals to me more on a daily basis. i am almost at the money under the mattress stage as it is. i despise using direct debits as the lack of control over when and how your money leaves you really annoys me and i now only have a couple for companies who refuse to let me pay any other way (but i’m whittleing those down too) i no longer have a credit card and pay for things predominantly in cash. it’s not that i believe in any great international banking conspiracy involving giant cannibal lizard-people or somesuch i just don’t apreciate getting charged £38 every time a company decides to take a direct debit out of my account 6 days before they are meant to..
so yeah, internet money lending (with a wonderfuly low bottom end loan amount of £13) does have something about it. of course the big concern is safety as – like ebay (allthough bittorrent might actually be a more accurate comparison) you are somewhat relying on other people. i’m not sure i would suggest funding the education of your first born through it just yet, but one to watch perhaps?