Can Credit Unions Keep Up With Social Lending?

I was reading Tim McAlpines blog over at www.cuckoocampaigns.com and his post "dinosaurs didn't have broadband, whats your credit union's excuse?" got me thinking. With all this talk about social lending being the "next big thing", what is your credit unions stand? Are you ready to embrace this new marriage of community and technology, or are you too caught up competing with the Bank of America down the street to see this rising opportunity to reach people on a personal level.

I know I've been talking a lot about Zopa, but I'm really excited to see a change in direction for lending (and of all the social lending companies I've looked at I find them the most attractive). I'm especially excited about the inclusion of credit unions as the main source for fund security. Right now, there are six CU's that Zopa has partnered with. When I first heard that these six credit unions had a field of membership covering all of the United States i was a bit upset...what about the rest of us? So I did a bit more research and found that credit unions that still want to be a part of Zopa can apply to do so. It was at this point that i realized the brilliance of Zopa's business model. It isn't about turning huge profits for Zopa and it's select few credit union backers, its about letting the consumer choose how and where they borrow. So, my advice to you is, don't fight the wave of alternative lenders, join them. I can feel the stampede coming...its your choice to get up to speed, or get trampled by those that are.

When Financial Aid Just Doesn't Cut It

A few days ago i wrote a short post on Zopa.com and the way that it, and a few other p2p companies, are changing the lending landscape. I mentioned using it to buy a new car, or TV, or to consolidate your debt, but i realized this weekend that i neglected to mention what may become one of p2p lending's primary purposes. It happened while i was sitting in front of the TV and one of those obnoxious Astrive student loan commercials interrupted my South Park viewing.

What would you do if you found yourself short on next semesters tuition? Astrive claims that its a better idea to cover your remaining costs with one of their loans than a high interest rate credit card, and i would agree. The issue though is that with an Astrive loan you could still end up with an interest rate of 10.5% and paying it off for up to 20 years...better than a credit card, but not exactly a great situation.

So, you point your browser over to our good friend Zopa.com. Take out that 5 grand you need to cover the cost of textbooks or R&B and let everyone know why you need the money. Chances are pretty good that somebody looking to invest is going to support your goal to further your education and help you out. So, even though the interest rate might not be dramatically lower than Astrive (the lowest going rate on Zopa is 8.75%), you'll be getting a helping hand on the payment every month as well as cutting out any commercial bank looking to profit from charging you bogus fees.

My point here is, look around and explore your options, they're out there waiting to be found. Credit Cards always seem to be the "quick fix" for money issues, hopefully sites like Zopa, Lendingclub, and Prosper, will become a more viable options than an 18% credit card...or the military, for getting yourself an education.

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...