peer to peer lending / borrowing

[Ballard]

Anyone got any inside knowledge of P2P lending and borrowing, it sounds like an intresting concept, one which breaks the banks stranglehold on liquidity?

[biffvernon]

You seem to have got younger, B.

A couple of years ago I bought some Ecotricity bonds. They were a form of P2P investment that left out the usual middle-men. I think I heard a trailer on the radio yesterday that it was to be discussed in the Radio 4 money programme.

[UndercoverElephant]

Anyone got any inside knowledge of P2P lending and borrowing, it sounds like an intresting concept, one which breaks the banks stranglehold on liquidity?

I use ZOPA and would recommend it. Got to keep an eye on it though, in order to get the best rates on your loan book.

[adam2]

I can see the merit in the idea since both borrower and lender should be able to achieve more favourable rates in the absence of profits for a bank.

I doubt that it will help with any general liquidity shortage though because an individual can only lend money that they posses, unlike a bank that can lend many times the money that they possess.

[Little John]

On just hearing about this, I must confess to feeling a bit twitchy about it if it is a system of lending at interest. Once again, it just seems like yet another scheme whereby people are encouraged to extract rent from one another since this is the only game left in town now that we don't appear to be able to make anything and sell it to the world any more. Instead, all that is left is for us to feed off one another. We're all bankers now.

On the other hand, I guess it is better than the banks since the fractional reserve is presumably 100%.

[Catweazle]

On just hearing about this, I must confess to feeling a bit twitchy about it if it is a system of lending at interest. Once again, it just seems like yet another scheme whereby people are encouraged to extract rent from one another since this is the only game left in town now that we don't actually seem to believe in making anything and selling it to the world anymore. Instead, all that is left is for us to feed off one another. We're all bankers now.

I don't have a problem with personal lending, it's a very old concept that works.

For example, I could build a plough and lend it to my neighbour, I expect the plough back, and a sack of whatever he grows in his field. It's a win-win situation. Soon a middleman will arrive, to put me in touch with people further away who want to borrow a plough, he will also want a sack of spuds for arranging the deal, and will presumably guarantee that I get my plough back. He is a banker, and it could be argued he is providing a useful service.

Nobody is evil in this chain, it puts the plough into the field.

Banking at it's most basic level is good, it's useful, and we should be looking to get back to this situation instead of wishing that the banks would disappear completely.

[adam2]

Banking is essiential for relatively advanced society.
Taking the example given above, of making a plough and lending it to a neighbour in return for a sack of the resulting crop, what if the plough maker had plenty of the same crop but needed shoes ?
He could charge the neighbour a mutually agreeable hire fee and spend the money on shoes.
In time the plough maker might make better or cheaper ploughs as a result of gaining more experience. These might be sold to persons from some miles away who know not what the plough maker needs, shoes? roofing tiles ? charcoal ?
It would therefore be sensible to sell the ploughs for money that can be spent later.
If the money is not expected to be needed for a while it could be saved in a bank and lent to someone else.
Money, and basic banking is therefore a requirement for all but the most primitive societies.

What we dont need, IMHO is huge scale gambling with other peoples money, and banks that are bigger than the real economy.

[Little John]

On just hearing about this, I must confess to feeling a bit twitchy about it if it is a system of lending at interest. Once again, it just seems like yet another scheme whereby people are encouraged to extract rent from one another since this is the only game left in town now that we don't actually seem to believe in making anything and selling it to the world anymore. Instead, all that is left is for us to feed off one another. We're all bankers now.

I don't have a problem with personal lending, it's a very old concept that works.

For example, I could build a plough and lend it to my neighbour, I expect the plough back, and a sack of whatever he grows in his field. It's a win-win situation. Soon a middleman will arrive, to put me in touch with people further away who want to borrow a plough, he will also want a sack of spuds for arranging the deal, and will presumably guarantee that I get my plough back. He is a banker, and it could be argued he is providing a useful service.

Nobody is evil in this chain, it puts the plough into the field.

Banking at it's most basic level is good, it's useful, and we should be looking to get back to this situation instead of wishing that the banks would disappear completely.

I have no problem with the lending of a plough. A plough is a real thing in the real world that has a real value in and of itself as well as exchange value for other real things. Money is in all manners a proxy for real things in the real world. It has no intrinsic value in and of itself. It is merely a stand in for those real things. Its only value is its exchange value and this is particularly true of unbacked fiat. All of which may be very useful qualities of course. In any complex economy, such a stand in for real things becomes absolutely necessary due to the cumbersome nature of direct barter,

It is when money begins to be bought and sold on the back of compound interest as if it was real thing in the real world and so as if it had intrinsic value in and of itself that all the shit starts. Most of our great civilisations learned that lesson pretty early on. "Perpetual" growth is the only thing that has allowed the modern world to forget those old lessons. However, with the physical limits of growth now almost upon us, we are about to relearn them.

[RevdTess]

I've been using ZOPA for my savings since the start of 2010. I've been earning on average 5.6% before bad debt (which has been minimal since the bad old days of 2008).

Like Steve I'm kinda nauseous about encouraging the debt-based economy, but at the same time we live in this world and not a Star Trek post-money utopia. At least with Zopa the banks aren't swiping a huge cut and lending my cash out to weapons manufacturers.

Zopa has just introduced a new feature called 'Safeguard' for new lenders which basically means that any bad debts should now covered by a fund set up for that purpose (paid-for by borrower setup fees). So when they advertise a current return of 4.6% (for 2-3 year loans) or 5.1% (for 4-5 year loans) that's exactly what you should get - unless we go through a massive Greek-style collapse that is, when all debt-related bets are off. That's what Gold is for, eh?

[Ballard]

Ok, thanks all, lots of intresting stuff to think about. Given that we live in this world and not Ian M Bank's culture, I think i might give it a shot.

[sam_uk]

As a slight aside I have about £50 in Deki: http://www.deki.org.uk/

I lend it to people in 'developing countries' when it gets paid back I lend it to someone else.

Not a way of making money, but if I remember correctly I can withdraw my £50 later, although have no real inclination to do so at the moment.

Would love to see it expanded for people doing organic/permaculture type projects. It's mainly small traders at the moment, with the occasional farmer

[emordnilap]

<bump>

A friend asked if I'd ever heard of peer-to-peer borrowing/lending and, tbh, this thread is the only place I'd ever read anything about it - meaning I know only slightly more than my friend.

Anyone on the board had further experience lately? Tess? Anyone?

[RevdTess]

I'm still using ZOPA but recently I've reduced my lending because the rates are getting lower and lower (around 4.1-4.4% after fees and before tax) and money wasn't being lent out as quickly as it had been. I've been using a Share ISA instead. At the moment 10% of my savings are in shares and the rest in zopa but zopa isn't as good value as it was even a year ago. That said I still think it's a good company.

Feel free to sign up using my referral link and give me free cash

[DominicJ]

On just hearing about this, I must confess to feeling a bit twitchy about it if it is a system of lending at interest. Once again, it just seems like yet another scheme whereby people are encouraged to extract rent from one another since this is the only game left in town now that we don't appear to be able to make anything and sell it to the world any more. Instead, all that is left is for us to feed off one another. We're all bankers now.

On the other hand, I guess it is better than the banks since the fractional reserve is presumably 100%.

Actually the reserve on ZOPA and such is 0%, not 100%
You give ZOPA £100, they give £100 to a borrower and you cant have your money back till the borrower pays it back.

[UndercoverElephant]

On just hearing about this, I must confess to feeling a bit twitchy about it if it is a system of lending at interest. Once again, it just seems like yet another scheme whereby people are encouraged to extract rent from one another since this is the only game left in town now that we don't appear to be able to make anything and sell it to the world any more. Instead, all that is left is for us to feed off one another. We're all bankers now.

On the other hand, I guess it is better than the banks since the fractional reserve is presumably 100%.

Actually the reserve on ZOPA and such is 0%, not 100%
You give ZOPA £100, they give £100 to a borrower and you cant have your money back till the borrower pays it back.

ZOPA is not a bank, and therefore there is no "fractional reserve" figure at all. It is simply a system that matches people who have money to save with people who want to borrow money. And since the return being offered is better than that being offered by banks AND the rates at which people can borrow money are also better than those being offered by the banks, this is a win-win-win situation. Lenders win, borrowers win and ZOPA wins. The only losers are the banks.

And it is not quite true that you can't get your money back until the borrower pays it back. You can sell your entire loan book - or at least most of it - to other lenders. This gets you most of your money back in less than 24 hours.