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Social Lending: An Effective Alternative to Credit Cards
- By Leonid Andreyev
- Published 3 March 2009
- Finance and Accounting
- Unrated
Credit card issuers aggressively pursue new borrowers and urge the old ones to pay more. All the mailboxes across the country are filled with new offers, rewards schemes and introductory rates of the credit cards.
Each credit card company tries to attract customers with promising low rates offers on balance transfer and provides high credit limits. Now the financial crisis has affected the entire world economy and credit card issuers are facing larger losses. In the past few months, many credit card issuers have stopped offering new credit cards, have lowered their credit limits, raised interest rates as well as closed the accounts of most of their creditworthy borrowers.
Lenders are now stepping into the market, which is increasing fear in the mind of credit card companies. This new category is called social lender.
It is a peer-to-peer lending, where lender has the freedom to choose the person who will use his money.
Te organizations like Kiva can lend $500 to a start up entrepreneur for purchasing equipment. Since 2005, the Kiva members have given more than $58 million to more than 83,000 entrepreneurs. There are sites like Facebook and eBay which are a gateway to social lending. Many members here lists loan requests from debt consolidation to moving expenses. In such case, lender is free to choose which loan he would like to fund, bid on that loan at interest rates and different terms.
The social networking sites allow borrowers to find potential lenders on the basis on their friend, location and network status.
Social lending has now extended to student loans also. Lenders now suggest students to apply for federal loans by using private lenders as fall back option.
Each credit card company tries to attract customers with promising low rates offers on balance transfer and provides high credit limits. Now the financial crisis has affected the entire world economy and credit card issuers are facing larger losses. In the past few months, many credit card issuers have stopped offering new credit cards, have lowered their credit limits, raised interest rates as well as closed the accounts of most of their creditworthy borrowers.
Lenders are now stepping into the market, which is increasing fear in the mind of credit card companies. This new category is called social lender.
Te organizations like Kiva can lend $500 to a start up entrepreneur for purchasing equipment. Since 2005, the Kiva members have given more than $58 million to more than 83,000 entrepreneurs. There are sites like Facebook and eBay which are a gateway to social lending. Many members here lists loan requests from debt consolidation to moving expenses. In such case, lender is free to choose which loan he would like to fund, bid on that loan at interest rates and different terms.
The social networking sites allow borrowers to find potential lenders on the basis on their friend, location and network status.
Social lending has now extended to student loans also. Lenders now suggest students to apply for federal loans by using private lenders as fall back option.
