CBS’ Money Watch’s Farnoosh Torabi recently commented on the peer to peer lending industry in her “You’re So Money” column last week.
Torabi initially started out as a skeptic of Lending Club and Prosper Marketplace, writing, “I’ve been writing about peer-to-peer lending for quite some time and I admit I’ve always been a bit skeptical. The idea is to take the the financial institution out of the picture and create loan agreements directly with individuals. I think it can be a fine alternative for borrowers, but for lenders there are major risks involved: After all, who’s to say this unsecured loan will ever be returned?”
She also highlighted the growth of the Peer to Peer Lending industry which is expected to hit $5.8 billion in loans this year, according to data from Celent. She also highlighted the difficulty to get a traditional unsecured loan from a bank.
Writing about Lending Club, she said, “Earlier this month Lending Club, an online peer-to-peer lending marketplace, announced that it facilitated more than $10 million worth of new loans during the month of May alone. According to the company, this is a record for any peer-to-peer lender in the U.S. Rival P2P site Prosper is originating roughly $2 million worth of new loans a month – a smaller, but still impressive amount.”
Torabi also offered some advice to borrowers, saying that they will still need to maintain your credit score to get a loan through a peer to peer lending service and that companies such as Prosper and Lending Club will charge an origination fee on the loan. She also noted that there’s a limit of $25,000 that you can borrow on each site.
