Wednesday, June 11, 2008

Lending money to individuals

You lend money to your bank, and trust that they will look after it. They're a big organisation afterall, and your money is pretty much guaranteed. This didn't stop a huge drop in trust when UK bank Northern Rock got into trouble in September 2007.

You also lend money to friends and family. You trust they will pay you back, and you know where to find them if they don't. But what about people you don't know? How do you trust them, especially if they're online rather than face-to-face?

The rise of social or peer-to-peer lending websites such as Zopa is luring people into the benefits of lending money direct to individuals rather than banks. Better rates, but can you trust the borrowers? They provide a profile on the borrower rating. This is based on credit checks, borrowing history and lender feedback, much like an eBay seller.

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