Wednesday, June 21, 2006

Not a bad idea if you ask me. Not a great implementation strategy either. More of an eeehh!

At, the founders describe themselves as the online market place for people to people lending. I thought about this idea a while ago but lacked the interest or the real know how to implement it but the site is now up and running. Long story short, many lenders/people can lend to 1 borrower an amount of money not exceeding 25K, all while reviewing the perspective borrowers credit worthiness and group affiliation for an agreed upon interest rate. However I see business slowing down for this company for one specific reason. Savings rates. When potential lenders have the opportunity to make 5%+ guaranteed in a savings or money market accounts, why would they risk their funds to make up to 8% with a person that may or may not pay them back?

Pop Quiz Should you:

A. Lend $300 to Joey Tuffguy, with a C+ credit score, for "business supplies" to make a potential 8% per annum?
B. Place $300 in a big bank of the US savings account and make a sure 4.75 per annum?

In other words savings rates are too good to enter into a lending situation with a stranger that may or may not pan out. I saw one borrower asking $600 to pay his rent, with a poor credit rating, whhoooaaa!

Plans for prosperous improvements:

When this site begins to offer bigger loans, from more informed and risk tolerant lenders, for borrowers/people in bigger payout businesses such as house flippers that need 120 day loans, then the potential for success will increase. Higher interest can be charged and there is a more win/win potential.