by Hassan Nicholas
In this economic climate a borrower seeking to secure a loan from a bank might run into challenges. The credit crunch has squeezed much of the available credit out of the reach of consumer's waiting hands, and unfortunately, the banks aren't letting up soon. The result is a significant market for credit from borrowers who are too risky or under-qualified to receive a conventional loan. However, when there is need there is opportunity and for that reason a growing community of "alternative" lenders have surfaced, mainly via internet, to fulfill that void. Micro-credit/Micro-lenders first arrived on the scene to combat poverty in developing countries. Now the same principles can be found world-wide, in all economies. With the state of our economy putting the grip on consumers, these personal loans offer an avenue to tap credit when banks run dry.
Here are a handful:
Wait a sec. Will this bring about competition to the banks? Probably not right now. Though the market is growing, a majority of Americans will go through a formal lending institution. Borrowers of peer-to-peer lenders are many times consumers that would not have been eligible for bank services anyway. Although, if this movement towards more merit-based lending gains enough momentum, if could prove a competitive force in the banking industry. Can you imagine if banks restructured the entire underwriting process to include elements such as 'good character' as part of the approval process? What if loan originators asked for the link to your Facebook or SomeMaySay profile?
Though, everyone who patrons these services aren't necessarily unable to secure conventional funding. Some might appreciate the "Go, do good" undertone. Others will enjoy the opportunity to avoid working through a financial institution. And the rest could be shut out from mainstream products because of barriers to entry like citizenship status or lack of collateral.
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