Peer to peer lending

Peer to peer lending services that allow consumers to lend directly to other consumers completely bypassing banks, have been around for a while now with Zopa in the UK and Prosper in the US. The system has even been described as the eBay for loans and has built up quite a following of consumers who would much rather deal with other consumers than with commercial banks. How it works is that borrowers list their loan details along with their personal profiles and lenders bid on the loans, with the bidder with the lowest interest rate winning the deal.

A study by Online Banking Report predicts that by 2011 person-to-person lending in the US could surpass 100,000 loans a year, worth more than USD 1 billion. Unlike eBay, which can connect buyers and sellers from around the world, peer to peer lending is generally bound by local financial regulations. Which means there's ample room for national or regional versions.

One of the new entrants to the scene is Boober, which was launched just last month in The Netherlands and works in a similar manner to Zopa and Prosper. Springwise reports that borrowers list their requirement, along with their credit rating (as determined by Experian), why they require the loan and what interest rate they are willing to pay. Smava launched last month in Germany is uses the group principle like Prosper to lend and borrow money. CommunityLend will launch in Canada in Fall 2007 and Wiseclerk.com again follows Prosper's system.