So Zopa‘s going to launch in the US any day now. They’ve changed their model for the US market – details in the WSJ – making it pretty different from the other peer-to-peer lending business, Prosper. Quick summary: loans are guaranteed by credit unions, lenders buy CDs with a capped rate of 5.1%, borrowers have to meet some tougher criteria to get funded.
Interesting approach. Eliminates risk vs. Prosper, where you can lose money if you fund too many loans that go into default. However, the capped rate of 5.1% isn’t much more than what you’d get on an ING Direct account, while smart lending on Prosper – funding relatively safe loans for good rates – could significantly beat that.
Myself, I wonder if Prosper’s sufficiently designed for evil. As it grows, is it going to be seen as a place where individuals can get a loan funded relatively easily and then jump ship, just by promising really attractive rates? If you have a terminal disease, or a gambling problem, or a sudden desire to go spend every dime on hookers and blow and then put a bullet in your head, are you going to head to Prosper for a loan you’re never intending to pay back? Happily, Prosper’s got a pretty neat market performance tool. I might dig about and see if I can’t spot any trends.
ADDED: Interesting, Prosper’s monthly state-of-the-market release indicates that lenders with bad credit can’t get loans funded despite higher interest rates. (Only 7% of funded loans went to subprime in October 2007 vs. 28% in October 2006.) And there’s a ton of tools for analyzing Prosper data – this page has a good collection of links.
{ 1 comment… read it below or add one }
Any bank can be played if you’ve got nothing to loose. Credit card companies don’t check if you’re terminal before approving a $25k line of credit. That being said, all the P2P’s have the potential for someone with less than stellar credit to write a good story and get money despite their credit.