Credit crunch presents major opportunity for Peer-2-Peer Lenders

by David Mullings

BusinessWeek has recently run a number of articles pointing out that credit card companies in the USA have been increasing interest rates and lowering credit limits, some in dramatic fashion – imagine going from an $13,000 limit to a $2,000 limit. (See articles: Over The Limit and A Credit Card You Want To Toss).

The last few years have seen the rise of peer-2-peer lending sites like Prosper.com and Lendingclub.com which allow users to borrow from other people at rates usually lower than banks or lend their money and get higher returns than savings accounts. One of the investors in Prosper is the Omidyar Network which was founded by Pierre Omidyar, founder of eBay.

As the credit crunch reduces the access to capital for the general population and makes the remaining capital more expensive by raising interest rates, peer-2-peer lending could finally become mainstream. Timing plays a big role in the success of a venture and the window of opportunity is now open for this market. Cash-strapped people will be seeking to maximize the return on their savings while also seeking out cheaper ways to consolidate debt and make ends meet.

The popularity of HYIPs clearly indicates that there is a large number of people who want better returns on their money and this provides one of the safest ways to become a bank and reap the rewards that they do.

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