I recently attended an excellent conference in London, on Facebook marketing. Somebody, I can’t remember who, made the claim that “Facebook will at some point become the world’s biggest bank”. I didn’t know whether to believe that. However, I did hear many presentations at that event from entrepreneurs apparently earning serious money through Facebook and other online resources.
What I didn’t hear that day, but I know now, was that hundreds of individuals now lend money to each other through Facebook. “Cutting out the middleman”, we used to say; and Facebook is facilitating it. I came across this interesting fact while trawling through my “newspaper cuttings awaiting reading” pile and found an article by Maryrose Fison in The Independent. It was a couple of months ago but no matter.
Debt rescheduling / consolidation / relocation?
People who are concerned about their debts often ask advisers if they should look for ways to move the debt elsewhere, for example through a debt consolidation loan. The pros and cons of that route have been discussed many times so I won’t go into it here, except to say that the general advice is always to avoid this kind of loan if it has to be secured against your home.
A zero percent balance transfer is another way of getting “free” credit. Even allowing for the fact that there’s always a fee of around 3%, it’s cheap money, provided your credit record is clean enough to get it.
Borrowing money from individuals, however, is something that was new to me; except, of course, for friends and family, who are often a source of funds from which debtors make offers to their creditors for “full and final settlement”. However, this new trend is borrowing from individuals who are total strangers.
Here’s an extract from what Ms Fison said:
“As hundreds of thousands of Britons struggle to get a foot on the property ladder, with banks continuing to crack down on new lending, social networking applications have become a lifeline. Who would willingly choose to pay through the roof for an unattractive loan package when there are millions of social network users gagging to lend you their money for less?
“The average rate of interest on a loan at the Lending Club over the past 36 months has been 9.22 per cent. On Zopa, the typical APR on a loan of £5,000 over three years is 8.3 per cent, and on Funding Circle a £15,000, three-year loan has an APR of 9 per cent -well below the 12 per cent a typical bank would charge.”
That sounds attractive, although there are lending offers on the market nearer 9% than 12%; some of them were listed on the same page of the paper under “best buys”. The issue, again, would be whether one’s credit record would be good enough to qualify. A private lender would also need reassurance but might be more flexible than a bank, as they are getting a relatively high return (much better than the high street, anyway) on their money.
Facebook apps
You’ll note that Ms Fison (excuse my formal mode of address: I’m old-fashioned and I’ve never spoken to her, though I shall be following her on Twitter from now on) mentioned The Lending Club; she says it was one of the first applications to be added to Facebook in 2007. She also mentions Zopa:
“UK-based social lending service Zopa is another provider, and the number of communal lending and borrowing sites with applications on social networks is growing at a staggering rate.”
Ms Fison concludes:
“Social networking applications may still be in their infancy, but given the popularity of personal finance and online peer lending, their influence on our day-to-day activities looks set to take off this year.”
Well, there is nothing to be lost and lots to be gained by investigating this further. I’ll certainly be doing some research into peer lending sites: watch this space!
WANT TO KNOW MORE?
For a copy of the full article in The Independent by Maryrose Fison: http://www.independent.co.uk/money/spend-save/maryrose-fison-personal-finance-just-got-a-whole-lot-friendlier-2173935.html
For a free sample of my book, “Back to the Black: how to become debt-free and stay that way”, go to:
kindle: http://www.amazon.com/dp/B004PLMAQM
Other e-formats, including .pdf: http://www.smashwords.com/books/view/22886
You can follow me on Twitter: @michaelmac43, or Facebook: Michael James MacMahon.