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March 30, 2021

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?



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...