Social Lending - An Alternative To Traditional Banks
While the idea of private lending has always been around, normally between family and friends, it has never really been available in a structured legally backed framework. This has recently changed with the emergence of sites such as Zopa (www.zopa.com), which is co-founded by James Alexander, one of the original founders of EGG.
In a recent survey it was found that 49% of those interviewed thought that the banks did not have the consumers interests at heart, 81% believed that banks were self indulgent and 76% thought that banks were basically greedy. This has opened the door to sites such as Zopa, who have the marketing expertise, the legal framework and the backers to make it happen. The internet is also playing a massive part as well because lenders and borrowers can easily be matched up online, funds transferred electronically and the two parties need never meet. As well as traditional sterling transactions, the site will no doubt expand to take in other currencies in due course.
A further area of the survey offers a real wake up call for the financial sector with 64% percent of those questioned stating that banks should also encourage social interaction and community participation, yet only 13% of the opinion that the banking sector does support the community. This has forced many to consider the aspects of social lending, with 56% of those questioned confirming that social lending is something which they would consider in the future.
The transactions themselves are carried out between members using an exchange format, with borrowers offered insurance cover in the event that they fall into financial difficulty. The policy will allow the outstanding balances to be paid off, offering both sides of the transaction that extra comfort. While Zopa do take a small fee per transaction, the borrowing and saving rates are much more competitive than traditional banks because of the reduced costs, and limited return required by private investors.
While social lending is still in its infancy and not necessarily suitable for all areas of finance, it is an interest idea which is sure to interest those of society who have had difficult experiences with the traditional financial sector.
Related Tags: banks, lending, social lending, traditional banks
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