Peer-to-peer loans finally coming to Canada?
By Gordon Powers, Sympatico / MSN Finance
As the global credit squeeze continues to cast a pall on lending, small players are vying to become the eBay of consumer loans: Welcome to peer-to-peer lending.
With P2P arrangements, individuals, some of them with little or no collateral, try to hook up with those with a bit of extra cash that are looking to lend. In some instances, lenders compete with each other to make loans, possibly even resulting in lower rates for borrowers than are available on credit card debt.
Initially, prospective P2P borrowers would pitch potential lenders directly by creating listings detailing how much they needed, what they planned to use it for and what interest rate they could handle. More recently, however, some sites have been taking a more active role in matching up borrowers and lenders – for a fee from both parties, of course.
While there are several P2P players worldwide, Canada has so far been a laggard although sites like Montreal-based IOU Central and Toronto’s CommunityLend hope to open their doors fairly soon, depending on the U.S. regulator’s attitude – which has been strict of late.
Prosper, the largest P2P site in the U.S, went on hiatus late last year, saying it needed to wait while the SEC evaluated its filings. Another player, London-based Zopa, decided to pull out of the U.S. altogether.
Lending Club, however, which recently registered with the SEC to create a secondary market for its loans, is still signing up lenders each week and new loan requests are reportedly growing.
Like any venture, P2P lending has its pitfalls, warns the Early Retirement Extreme blog. Here's his experience with Prosper.
So, rather than tap your in-laws again, is getting by with a little help from your new friends an option you would consider?
Posted by: bill k | Mar 31, 2021 1:19:49 AM
Great idea!
Break up the bank monopoly that loans money it prints out of thin air. At least this way, only money that is already in circulation gets loaned out... reducing inflation.
Not only will inflation (the value of your money dropping) be reduced (because banks will be printing less money out of thin air since they will be loaning less), but the money that is lended by these P2P individuals is also money that won't be sitting in a bank account (and thus on a bank's "asset" balance sheet). This means that banks will not be able to use "fractional reserve banking" as much (which occurs when banks loan out 10x the money on the books - basically money they do not have and also print out of thin air).
For a crash course on the banking system, please look up a documentary called: "The money Masters". It is very informative and enlightening!
Posted by: Yo! | Mar 31, 2021 1:22:35 AM
Great idea!
Break up the bank monopoly that loans money it prints out of thin air. At least this way, only money that is already in circulation gets loaned out... reducing inflation.
Not only will inflation (the value of your money dropping) be reduced (because banks will be printing less money out of thin air since they will be loaning less), but the money that is lended by these P2P individuals is also money that won't be sitting in a bank account (and thus on a bank's "asset" balance sheet). This means that banks will not be able to use "fractional reserve banking" as much (which occurs when banks loan out 10x the money on the books - basically money they do not have and also print out of thin air).
For a crash course on the banking system, please look up a documentary called: "The money Masters". It is very informative and enlightening!
Posted by: TC | Mar 31, 2021 10:32:57 AM
The prelude to a new round of the mafia and loan sharks.
Posted by: Bugsy | Mar 31, 2021 12:24:28 PM
P2P works if it is local, personal and community based. In the 50's my parents
were using P2P although it was not called that--it was called by the namesake of
the local person who had more money than most, but who was legiit and respected
as a community builder.
If one goes to the larger scene (online, clubs, etc etc) what has changed from
the very SYSTEM we are presently mired.
Local is keeping your money at home; similar to the local tomato grower. Protectionism?
Yes--only your own backyard understands your own backyard.
Bugsy
Posted by: John S. | Mar 31, 2021 1:13:11 PM
I would not consider lending money in a P2P system unless I reeceivd a rate of return far higher than what a credit card company charges. I would also need to have the borrower's personal details, so that in case of default, I can hunt them down mafia style.
Posted by: bill k | Mar 31, 2021 5:45:36 PM
You guys all miss the point!
What has changed, bugsy? Local or not, the major difference is that it is people loaning out to people money that IS ALREADY IN CIRCULATION.
The "very SYSTEM we are mired in" is the one where banks print money out of thin air to loan out at 10x what they have on the books ('fractional reserve banking). This creation of new money leads to inflation.
The P2P system, local or not, competes directly against the current system. It leaves less money on the bank's and allows private individuals the opportunity to loan out their money which is already in circulation (more efficient, less inflation).
It is OK for a person to collect interest on money they've earned. It is NOT OK for the banks to collect interest on money they print out of thin air. See the difference?
If not, google and watch movie "THE MONEY MASTERS".
Hmmm, but you loan out your money John, to a bank, simply based on a promise that they will pay you back? There is no money in the banks. If 10% of the population went to ask for their cash at once, the banking system would collapse. It's all a leveraged PONZI scheme riddled with counterparty risk!
Posted by: Homey | Mar 31, 2021 8:21:09 PM
Loan Sharks? Mafia?
Interesting comment.
Doubt that, unless they are into money laundering.
No they don't do that stuff, do they?
Billions of money to be laudered...
Posted by: vogueboy | Mar 31, 2021 9:51:01 PM
... Sounds like Loan Sharking to me.
Posted by: John S. | Mar 31, 2021 10:16:03 PM
Bill:
I can't argue with you on your points. I, however, do have the experience of being able to withdraw $55,000 in cash to buy a new car on the same day, and $208,000 in cash for a new house on the same (but different) day. Now mind you, I did not leave the bank with a suitcase fillled with bills, but nevertheless, I own the car and house outright. Could I do that if I had my money in a P2P system?
I have lent money to friends, but much much less than the figures above. In several cases, these friends have refused to pay me back. Needless to say, they are no longer my friends and they have paid for their sins in ways that cannot be traced back to me.
I agree that if a large percentage of people tried to withdraw their money banks at the same time, the banking system would likely collapse.
Posted by: SP | Apr 5, 2021 8:35:51 AM
I am quite surprised at some of the 'loansharking' comments posted. If it is regulated by the government it will not only remove the risk of illegality from these personal loans, but also be safer for the country (not being 'fractional reserve banking' based). It will eliminate the financial pimps sorry 'incompetent bankers' from these loans and allow the lenders/depositors to know where their money is going. As opposed to being invested in 'secure' Madoff/Stanford investments.
Posted by: Buynothing | Apr 5, 2021 2:16:24 PM
I keep as little money in the bank as I can possibly manage. Just enough to cover the monthly service fees, and some temporarily in savings if I want it out of my hands for a few days. Since the bank pays me no interest on either my chequing or savings accounts, I don't give them any money to play with.
Posted by: Gordo | Apr 5, 2021 10:50:34 PM
Loansharking? Isn't that what the credit card companies have been getting away with for years. It wasn't that long ago that kind of juice was called "Usery" but now credit card companies charge twice which would have qualified for usery and we just keep paying it and quietly grumble to ourselves. Meanwhile the credit card companies just keep piling it up. If we could maybe get those institutions to loan money at a reasonable rate we just might go along way to alleviate the problems we're seeing lately. But sadly the greed of these companies is so deep it will likely not happen. The only difference is the credit card companies don't bust your knee caps!!
Posted by: Secured Loan | Apr 25, 2021 8:04:29 AM
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