Peer to peer Lending

The concept of peer-to-peer lending, also known as P2P lending, has been around for centuries, and though the cyber world’s application of it is relatively new, it’s catching …

The concept of peer-to-peer lending, also known as P2P lending, has been around for centuries, and though the cyber world’s application of it is relatively new, it’s catching on quickly as an alternative to traditional money lenders. Since their February 2006 launch, the company that originated the peer-to-peer lending concept, Prosper.com has facilitated over $90 million in loans to almost half a million individuals. That popularity, and profitability, has spawned other P2P lenders, both in the U.S. and the U.K., which have enjoyed similar success.

The facilitator provides a venue that brings together borrowers in need of a loan with lenders who have discretionary funds to lend. A borrower requests a loan amount between $1,000 and $25,000, and states a maximum interest rate that they will accept. All loans are unsecured, non-guaranteed and fully amortized over a 3-year period. A lender “bids” on the loan, offering to partially or fully fund the loan at a specified interest rate. Once the listing closes, the bids from those lenders with the lowest rate of interest are accepted and combined. The loan amount is funded through the borrower’s bank account, and payments of the loan are automatically withdrawn each month and forwarded to the lender.

For some borrowers, peer-to-peer lending may be their last chance to obtain a loan, especially given the liquidity tightening and strengthening of credit criteria by traditional lenders. A borrower still needs to meet minimum credit standards (i.e. minimum FICO score), and their identity is verified using national credit reporting companies, hence accurate personal information, including legal name, social security number, bank account, etc. must be provided.

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When writing a listing, the borrower provides whatever information they deem necessary; the idea is to create a compelling, but truthful, story that will entice people to lend. Not every borrower will get their loan request funded, and that is usually is a factor of their creditworthiness. Successful borrowers pay a loan origination fee to the facilitator, which is based on their credit rating.

The lender can minimize their risk by scrutinizing the borrower’s profile, feedback, referrals and credit rating and asking questions of the borrower to their satisfaction. The risk of default in peer-to-peer lending exists; however, the lender can mitigate that risk by diversifying their funding among several borrowers. The lender needs to factor in the loan servicing fees charged by the facilitator and deducted from the repayment amount, when determining the offered interest rate.

==Companies==
===North America===
* [[Fynanz]] – (US) P2P financing for student loans.
* [[Lending Club]] – (US) P2P lenders and borrowers matched through social connections.
* [[Loanio]] – (US) Stealth phase P2P lending starting, scheduled for launch in 2008.
* [[www.zimple.us]] – Person to person lending focused on pre-existing relationships, for profit and non-profit communities
* [[Zopa]] – (US) In the US, Zopa offers guaranteed CDs to lenders and loans to borrowers.
* [[Prosper Marketplace]] – (US) America’s first P2P lending/borrowing auction-style marketplace.
* [[Virgin Money]] – (US) Person to person lending focused on pre-existing relationships.
* [[FYGO]] – (US) 1st Person to person lending collaboration site for friends and family
* Cundina – (US) 1st Finacial Rotation Lending Site For Friends and Family- Coming soon.
===Europe===
* [http://monetto.pl Monetto] – (Poland) Most safety Polish P2P lending site
* [http://kokos.pl Kokos] – (Poland) Polish first P2P lending site
* [[Loanland]] – (Sweden) First P2P lending company in Sweden. See [http://www.loanland.se www.loanland.se].
* [[smava]] – Germany’s first P2P lending/borrowing marketplace. [http://www.smava.de/ www.smava.de]
* [[Zopa]] – (UK) In the UK, Zopa employs a direct person to person lending model.
===Asia===
* [[dhanaX]] – (India) India’s first online/offline P2P lending/borrowing marketplace.
* [[maneo]] – (Japan) First P2P lending site in Japan. See [https://www.maneo.jp/ www.maneo.jp].
* [[PPDai]] – China’s first P2P lending site.
* [[Wokai]] – (China) leverages the internet to connect lenders to local agents for starting small businesses
* [[Oneclick.com]] – (Korea. republic of) P2P lending & Borrowing Marketplace in korea, see [http://www.oneclick.com]

Sources:
http://www.smartmoney.com/consumer/index.cfm?story=20071015
http://www.businessweek.com/magazine/content/06_27/b3991418.htm

http://www.prosper.com/

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