The Rise of Alternative Lending

I'm tired of Loans...I'm tired of paying some faceless institution more money than I borrowed to buy that new car or TV. I'm pretty sure that if I'm fed up with it, a lot of others are just as fatigued with the system. Fortunately, a few credit unions and newcomers to the Internet movement have tried to tackle the issue with what has been termed "alternative lending".

The site Zopa.com, with its recent US release, is trying to change the way people borrow. Zopa sort of "cuts out the middle man" in lending. Borrowers take out a loan (which then signs you up for an account at one of the six Zopa CU partners), then set up a profile and "advertise" their reason for getting the loan. Got some extra cash? Put it in a Zopa CD and choose which borrowers have a purpose you support. Depending on your chosen rate and amount, your investment helps lower those good intentioned borrowers' monthly payments. Whether its somebody trying to start a business, buy a new car, or consolidate their debt, you can give them a helping hand without ever risking your own financial well being. They explain it pretty clearly with this quick little "how it works" page


This approach makes so much sense and puts a human face on the loan instead of a logo and a percentage rate. It would be really cool to see collaboration of local credit unions in the same way. It could be a big step in changing the way people borrow and invest. Hopefully in the future more and more credit unions will jump on the alternative lending bandwagon, get some much needed change made, and bring our "people helping people" motto into the real world in a totally new way. Would you rather borrow from a faceless institution or from your brother Charlie?

Of course that's assuming you trust your brother Charlie...