Wednesday, July 25, 2007

Social Lending in Canada

There’s something new on the financial horizons for Canadians you’ve might have already heard, it goes under several different names Peer 2 Peer Lending, Micro Lending and Social Lending. In the U.K. they have Zopa the U.S. has Prosper and in Canada will have Community Lend by the fall of 07. Brought to you by Michael Garrity, a former vice-president of marketing at Canada Post's online bill-payment division who co-founded CommunityLend with Colin Henderson, former head of online banking at Bank of Montreal.

Basically how it works is that an individual will place a online request for X amount of dollars for whatever reason at that point if your inclined to you can either foot the entire loan or a portion of it. The lender or lender’s get to set the interest rate based upon the person past credit and the site of course takes a fee for basically operating as a broker. There are security measures put into place so that your not blindly lending money to a stranger although I won’t get into the security measures. Prosper claims that fewer than 2 per cent of its borrowers have defaulted, while close to 3.5 per cent are at least three months late on payments, according to the company.

Even the social networking site Facebook has people available to lend money to other, most people that do request the loans are higher risk but granted higher returns due to the interest that can be charged to them due to that reason. I believe this will be a welcome change in Canada for not only borrowers but for private investors who’s looking for another avenue without going into private mortgages. If you would like to read more about this the first site I learned about this was from there’s also who blogs about his Prosper experience or just bring up Community Lend and there's several different articles right on their front page.

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