Anything better than Personal loans?
Suppose you don’t have enough money for your wedding or for the foreign vacation you’ve planned, what will you do? Simple option is to approach the banks for a personal loan, but if you are not comfortable with the rates they offer you, do you have any other option? You know a friend or cousin who has that excess cash in their fixed deposits, will you approach them and offer better interest rates and by the way get the money you need at lesser interest rates than the bank had offered you?
It’s a win-win situation right, but do you feel delicate to ask, thinking age-old proverbs in mind, that it might cost your friendship? Better go and check the online community, lending club in Facebook, they might’ve already become a member waiting for someone to lend.
Person to Person lending:
Lending club is a person-to-person lending company that uses the social networking site Facebook platform to connect lenders with borrowers. It bypasses the banks and helps borrowers get loans easily after verifying their financial status and suggests better interest rate as per their credit ratings. For lenders it is an option to earn more income from their idle cash than keeping it in a savings or fixed deposit account.
So to the lending club memebers, A friend in need is a business indeed. And if this model grows big, will Corporates too think of getting loans from these clubs in the future? May be, as for many entrepreneurs, raising capital is the most difficult task.
Person to Biz lending:
We’ve seen that recently too. After all the hard work Captain Gopinath had no option but to sell 26% stake in Air Deccan to Kingfisher. Mallya who clinched the deal saying, he came in only as a strategic investor, now gets ready to replace the Air Deccan’s bare hand logo with Kingfisher bird. Slowly Air Deccan brand may vanish in the future. Had Captain Gopinath got a chance to raise money with out diluting his equity, he would not have lost his airline after the take off.
Despite the economy growing at 9%, only a small percentage of our population has invested in equities. People with fixed returns mindset might be interested in lending to big business than holding equity. If someone can trust their friends friend in Facebook and lend money for 3 years, won’t they not trust a company like Tata, provided they are ready to borrow.
Oops . . . Reality:
OK. Dreams apart, presently India do not have any personal credit rating system like FICO in the US, so implementing similar person-to-person lending scheme here will be a bit more difficult. Let’s see if someone will take the initiative to start the p2p lending first.
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ya good idea.
But the difficulty is how they can believe the social networking site. How they can trust the borrower can repay the money. satheesh
See the
P2P-Banking.com blog for international developments in p2p lending (none active in India yet, but there is a site my-lending.com which’s owner is in India)
Wiseclerk