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Can Peer-To-Peer Finance Work?

Posted by ryuzaki0 on from the lawsuit-in-3-2-1 dept.

Dotnaught writes "Two companies, Prosper and Zopa, appear to be convinced that social networking can be combined with borrowing and lending. They're intent on using eBay as a model for listing and bidding on loans without the involvement of a bank. Call it peer-to-peer finance. There are already some 800 groups on Prosper ready to loan money to specific causes, such as the Apple User Group, 'a lending group for those wishing to purchase either a Macintosh or Apple iPod.'"

2 of 261 comments (clear)

  1. Re:Existing Finance by Damathon · · Score: 5, Interesting

    These businesses may be entering a market that's already full of competition but I think the main idea is that regular people can loan small amounts of money, together effectively becoming as large a business as the existing businesses -- although the profits may be smaller, people aren't doing it for a living. Each person is giving a little, but they can effectively compete with large companies. (And losing $100 or so won't hurt the types of people who will invest money into P2P loans).

    Although it might not be as large a benefit to investors, it could increase competition in an already competitive market and help borrowers to secure better loan terms. Hopefully, this could also help out people with poor credit ratings as there are more potential businesses to loan them money.

  2. Similar to Angel investors vs VCs by Anonymous Coward · · Score: 4, Interesting
    There are plenty of rich guys willing to study "small" deals that existing financial providers won't deal with.
    Two obvious examples are
    • Angel Investors that fund many companies that VCs and Investment Banks don't. They make their money because they're willing to study complex opportunities that may be close to their area of expertise, and
    • the other obvious example is the mob, who gets higher interest rates and can afford to take on riskier loans because they have a more effective collection agency.

    And it's hard to underestimate the stupidity of some lenders. I imagine there are plenty of people with a lot of money who will seriously consider lending to a high-school kid to get an XBox in the same way that they consider lending to former Nigerian Royalty to help them get millions out of there.