“I will gladly pay you Tuesday
for a hamburger today.”
This is an interesting concept, but I can’t help feel that if it proves too successful, “the big boys” will be lobbying Congress like crazy to regulate such sites out of existence. It’ll all be in the name of protecting consumers, of course, and there’ll be some vague warnings thrown in about how terrorists could too easily get loans this way. Bank executives will sit before Congress and pose as Supermen trying to save the little guy from himself. A few victims will be rounded up to testify (with tears, of course) about how they were ripped off.
You Need Money, I’ve Got Money: Let’s Make a Deal On-Line
Andy Mowery needed $10,000 to expand his business. He knew going to the bank would just take too long.
“They want more documentation. They want stacks of paperwork. They want records from years ago,” Mowery said.
So, instead, he tried a new way to borrow called people-to-people lending. Web sites like Prosper.com connect people who need money with people who want to lend it, all to make a little cash themselves.
“Instead of people buying and selling products and services, people are really buying and bidding on loans from other people,” explained Chris Larson of Prosper.com.
Here’s how it works. Borrowers post a profile with how much they need, up to $25, 000. The interest rate they hope to pay and what the money’s for. Sites like Prosper then look into their financial history, assigning a credit score. Lenders then bid on the loan.
Related Links:
Prosper.com
Prosper.com: FAQ Must reading if you want a feel for how all this is supposed to work.
Normally I don’t defend banks, but I see this as a ripe opportunity for abuse. How long until Tony Soprano sends someone to “whack” poor old Wimpy because he hasn’t paid for his hamburger? If you want a fair deal, screw the bank and go to your credit union.
Sites like this have been operating successfully in Europe for at least the last three years that I am aware of. There’s nothing wrong with people to people loans. Granted there will be fraud and scams and thief but only if people are gullible or if the sites fail to implement safeguards.
There’s no sense paying higher interest to faceless corporations. Frankly I could use a $70000 loan right now and I would gladly use an alternative lender instead of a bank or credit union.
I agree with Greg, above. In Canada, the major banks are all generally pretty rigid with their lending – the credit unions, trust companies and independent, smaller chartered banks all offer better rates, have less stringent lending requirements and generally offer better customer service.
Or if you -really- need money, you can try Wells Fargo. They’ll lend anything to anyone – for extremely high interest rates.
So you agree that big business benefits from regulations then?
AB CD — Big business is the first to complain about regulation and the first to ask for it when it is to its advantage. It’s called hypocrisy.
Big business also benefits from the big government give aways.
I use to work for a big four consulting company for 8 years – I recently had lunch with an old boss who is in change of outsourcing all IT jobs. He claims that if it weren’t for big tax breaks from the Gov, outsourcing would be 20% to 50% more expensive than in house.
Their plan if the tax breaks get dumped? Fire all the Indians they hired and start over.
I don’t know about you’ll but in my 20 years of working, I haven’t seen this so called “more efficient” private sector that everybody keeps claiming is out there. I’ve seem small businesses be very efficient, but the bigger they are, the more they whine for tax breaks and give always – like big oil.
After the first big default, we’ll see how long it lasts.
Managing and tolerating risk is not for amateurs.
It’ll be interesting to see how high interest rates jump after a default.
Wells Fargo and the “predatory” lenders don’t charge through the nose for nothing. These are unsecured loans, mind you.
On the other hand, I wouldn’t be surprised if the average credit score of Internet users was higher than the population at large. These sites are like an unofficial credit union of Internet users, on top of the “communities” that Prosper uses.
The Economist did a story on this, and I’m sure they’ll do a follow up when it all comes tumbling down.
I just read an account of the crisis at Lloyd’s of London after Hurricane Hugo in 1989. The vast majority of “names” that had signed up to cover losses had no idea what they were getting into. Now Lloyd’s has a limited-liability structure. Many of these Prosper lenders are going to get a jolt.
I’m going to go right onto eBay and offer a $10 Bill and start the bidding at $11 with $5 shipping and $20 buy it now. Sounds like a trend starting here.
Here is my description:
“Rare US paper money, only one made with this serial number. Supurb artwork with fine engraving on unique paper; desired by individuals all over the globe. Originally owned by the US government itself and made available by way of limited distribution through banks.
The previous owner of this bill assured me that it was once owned by Elvis Presley and later Dale Ernhardt, and I see no reason why this is not so. The bill has a few stains and wrinkles with a few rips and is torn part way through, but that only adds to its historical appeal. This would make an excellent addition to your collection. Don’t let this one get away.
Our terms: You pay, we mail – unless of course you don’t pay, then we get even. All items are described to the best of our minimal abilities. We are not experts on all items we sell. Items are sold “as is” and in used condition unless otherwise stated. Please understand that some items come with issues consistent with age or use and are sold without warranty of any kind. Please ask questions prior to bidding and we will tell you what you want to hear. We will only consider refunding payment on an item if it has been grossly misrepresented in our exclusive judgement. Bills may not be official US currency and picture may not be of the item offered. Insurance is optional for most of our auctions. We strongly recommend that you insure any items purchased. In no way will we be held liable for items lost or damaged or simply undelivered due to lack of shipment. “
Mike,
You forgot the Jesus angle. If the proof mark looks like Jesus, you have a gold mine!
Sounds The Alarm,
Don’t let on about the Jesus mark. It goes up on eBay next week – just as soon as we unload this current one. Same serial number, just with an added inkjet mark – mike