I was interviewed last week on the subject of peer to peer lending. My comments aren't quite in context, but this is a nice intro/overview to peer to peer lending in the Sacramento Bee.
The points that I shared with the reporter are:
1. Lenders will have to see good management of receivables by their selected P2P companies to make P2P lending a long term "sticky" trend.
2. Borrowers will have to get a better interest rate than they can with traditional banking. If credit markets loosen up again when the economy calms down, I'd like to see P2P lending hold on, but if interest rates go down for borrowers, they're not getting better for lenders--how will P2P companies respond to hold on to lenders? My hope is that they'll lower their administrative fees and they'll be able to based on economies of scale. That said, I don't know how much administrative cost there is to running a P2P company, and I don't have a sense for how much the industry can benefit from scale.
I think Lending Club's IRA product is a very good way of hanging on to lenders longer-term.
This all presumes of course (my presumption) that credit will become less expensive in the consumer market. Consumer debt interest rates and credit availability cycle up and down, and my assumption here is that the current market will eventually relax.
Jessica Ward is a freelance writer and blogger from Seattle. She also blogs at www.pennywisefamily.blogspot.com and is guest bloging at www.debtkid.com.
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