Internet lending

I've blogged about Prosper.com a few times in the past (here and here are a couple of examples).

My basic take on the whole thing was that the "feel-good" borrower-lender relationships being promoted would give way to traditional numbers-based lending. That is, a reliable credit score will beat out a compelling sob story every time.

And that's what seems to have happened. Prosper lenders I know started in good faith trying to help borrowers in need, and these days they just look at credit ratings and ignore the personal narratives and borrower profiles altogether.

I see Richard Nikoley is eyeing the peer-to-peer lending industry as well. He's started accounts with Prosper and Lending Club, and not surprisingly, has started out with a clear head. From his blog:

I'm not interested in people's stories, only their credit grade, debt ratios, and so on -- all the classic criteria.

I know Richard to be firmly grounded in reality, so of course he's not just going to lend to the person with the best narrative. He's going to use proven criteria. The bottom line is, the credit scoring system we have works pretty well. It's not perfect, or else there'd be no need for books by me about repairing your credit. But credit reporting and scoring are not about to be replaced by personal narratives.

Though maybe traditional creditors will give way to more peer-to-peer lenders. I'd like that. While I don't think creditors are evil for using traditional credit reporting, their treatment of their debtors is less than virtuous. I don't expect individuals lending with peer-to-peer websites to completely negate their lending agreements and change fees, terms and interest rates in violation of their signed contracts. We'll leave that sort of thing to Bank of America and the other lenders who aren't on this list.

I look forward to seeing what else Richard has to say about peer to peer lending, and yes, my curiousity is piqued about Zazingo.

Comments

[Richard Nikoley]

Jeff:

FYI, it was your original entry about Prosper that alerted me to P2P lending. I told the guy who was General Manager of Provanta, and we watched.

He and I are now the co-founders of Zazingo. If we make a go of it, I can promise a bidding technology that will blow everyone's mind.

[robert]

A Good article Here...

http://ezedir.com/article/Business/article_Tips_to_Cope_with_Credit_Card_Debt.html

[JP @ Mens Watch Reviews]

P2P lending is an interesting industry and certainly one to keep an eye on. Technology has opened (and will continue to open) some very cool doors...

Enjoying your blog Jeff.

[How To Read A Credit Report - Top Internet Guides]

Lending based purely on credit history and FICO score has worked for over 80 years.

I can't figure out who thought it would be a good idea to lend money to people undocumented. Other than sole proprietors and small business owners, as well as investors in clear and good standing with the bacnk, there is really no logical reason for anyone to have changed the rules. Except, greed! Frankly, I'm glad the mortgage banks are getting reemed, and I wish the FED would stay out of it. People need to save their down payments, build their credit, and get traditional loans.

I have started writting a series of articles on my blog called "Mastering FICO." The first article, How To Read A Credit Report is part 1, where we explain everything you need to know in order to manage your credit. I hope the information in this guide proves valuable for your readers.

[Sean West]

Get your own mortgage credit report before the lender does.

There is a new service I recently signed up for. Instead of the free credit report that you see advertised on tv, which you can only get if you sign up for their monthly service, you actually pay a smaill one-time fee and get your own credit report. You get the exact same report the mortgage lender gets when they order your report. It's called an RMCR, residential mortgage credit report, or sometimes called a tri-merge because it pulls from all three credit agencies. I installed a link to it on my website in case you want to access it. I do not receive referral fees or commissions on this.

[Wayne F.]

P2P will have its day in the Sun.Why? Because innovation demands it. The engine that drives the free enterprise system is innovation as well as outside-the-box thinking.