This is just a fantastic idea! I can't lend much but if we all chip in $100 this can surely work.  

I'm not convinced this will work. In this economy you'll find plenty of borrowers and very few lenders. I'd do it but I doubt many people would.

I love it!

Great idea.  Anything that can help loosen up our credit market.

I like the idea!

the idea is awesome, i hope there would be enough lenders.

A simple but brilliant idea. It will allow people to connect and lend on a more local and community  level. It will energize the young and allow ideas to become viable entreprises. Also it will allow lenders to choose and control the whereabouts of the money they invest. I love it!

This is exactly what would stop our dependency from banks and other credit organizations.  Let people fund each other.   The true power of the masses.

Right and fair idea, should work out!

I am a lender on a couple of social lending Websites and most lenders there are actually making money. I'm in!

I think this is a cool idea.

Let's go for it. What's the risk? to loose what, a few bucks, but what if it works?...

The idea is not only good but, necessary. Perhaps the model to study is the micro-loans systems used in many third world countries for small family and individually owned businesses. Having large numbers of small investors is an excellent way of keeping up the "yes, we can" spirt launched by President-elect Obama as well as pressure the larger players of corporate finance to "pony up".

How is this different than any of the many Credit Union out there?  Would the money be federally insured?

Yup, I got a loan from here.

http://www.virginmoneyus.com/

Your site stole our idea!

Indeed this is such a nice idea. Credit just seems to keep rolling up. It'll not be easy but very good idea.

Nice Work

This is the right idea for the times.  The banking business model is in disrepair and the idea of creating alternatives within the regulated environment that are trusted, yet elminate middle men, and promote transparency in lending is a wonderful thing.  Its also good for the economy.

@Randy ...  a few of us just picked up on this later today, and have been telling friends in blogs and twitter.  Nothing complicated - its a deserving idea. 

I disagree on Economy vs social entrepreneurship though.  "Social" aside this is an entrepreneurial venture because the underlying motivation in a market economy is to make money.  Everything has an economic output, but that doesn't mean its in the economic category. 

In my view this is a business model suggestion, so entrepreneurship seems to be in the right general space.  Thoughts?

@ Randy @ Coling

I believe I put this in the right category.

The idea is to see DIRECT money from American's to other American's for small businesses. The DIRECT model is social, and the small businesses that need money are the entrepreneurs. In fact, it's the perfect category for this idea.

The fact is that right now the best way to get credit flowing again in this country is to do it OURSELVES.

Why should we put our trust in banks who are the main culprit for how we got into this mess in the first place? I believe we can get out of this mess on our own, we just need to connect directly businesses and individuals needing money with those that have it.

It's about time someone came up with this idea. There's been a long overdue bad rap put on these kinds of initiatives and this is a good reminder to people of how we each have a little bit of power and how together we can solve big problems that affect everyone.

I'm in.

P.S. - It's been a pleasure to forward this to all my friends, family, colleagues, students and clients.

P.P.S. - For what it's worth, I have a background in Statistics and I've noticed nothing strange in consideration of how contests often go especially in the latter phases. A lot of contests are normally pops and fizzles marked by occasional peaks and valleys however more often none. It's also worth noting that the top idea in some categories, this one being one example, was entered onto the site very recently e.g. just yesterday... More importantly and beyond the scope of this site though, at the end of the day what really matters is that ideas not be popular. They just need to work!

@randy- happy to oblige, although this is all availble via search:

http://thebankwatch.com/2008/12/30/the-right-idea-for-the-times-uncrunchamerica/

http://twitter.com/bankwatch

http://twitter.com/modernmod

http://tweetscan.com/index.php?s=change.org

the idea has 2 basic problems and one major one in my opinion and is probably not workable.  would be interested to hear what you have to say.

1)  in this environment where risk is extremely high, what interest rate will you charge to justify the risk.  basically how do you find out if a local small business is not committing fraud.  do you have those kind of resources?

2)  so America got in this mess because people and businesses borrowed and consumed too much money.  you want to support this even further?  sounds like the road to disaster.

3)  who will provide the legal fees and other such admin costs if the business was to default on the loan?

That's probably the best idea I've seen on this site so far. You got tons of money sitting idle on one side and small businesses struggling because of the lack of available credit on the other side. It just makes so much sense to match the two together! 

@Ali - great questions, and I am happy t offer at least my perspective.

1) you have hit an important point here. The degree of risk is related to the quality of borrower.  The companies offerring this service are quite clear about that risk so buyer beware.  For example at Communitylend we will be showing loans that meet a certain level of quality.  Check with your provider so see what their minimum standard is.

2) imho the majority of borrowers will be paying of credit cards, so we are aligned on this point.

3. default costs vary with providers, so better to check this out in advance.  The key is to assess the defalt risk on the loans you participate in. 

To the fake Scott:  http://www.change.org/profile/view/221596

If you want to question an entry in the contest at least have the guts to do it under your own profile. As it stands you just look like a bitter cometitor and for adding all the extra white space you look like a jerk.

This is a fantastic idea. I hope it wins and I'm ready to be a part of it as a lender!

This is a phenomenal idea -- and, in my mind, DEFINES social entrepreneurship. I am voting for it and going to keep the word-of-mouth effort to support this idea going!

Randy, There is a HUGE difference between not using your full name and making a sham profile purely for the purpose of knocking someone's idea. 

Scott Krager who posted the criticism (http://www.change.org/profile/view/221596) is obviously not the Scott Krager (http://www.change.org/profile/view/193379) who started this group.  The sham profile was copied for the purspose of leaving a negative comment only and it attempts to impersonate the original poster.  That is bad internet form all the way around and the user should be banned for sockpuppeting and intentionally impersonating another.

Although I am not using my full last name, I did not copy someone else's profile.  Addtionally, I did not post a comment knocking somone's idea for Change -- I posted to criticise someone for sham posting and being a jerk.  Finally, you can find my personal website through my profile if you want so I stand by my comments.  I just choose not to blast my full name all over the internet. 

I totally support you coming to the idea and posting questions or criticisms under a real profile in a polite manner. Anyone can disagree about the cause, the category, but no one should set up a sham profile purely for the purpose of criticising.  And certianly posting hundreds of lines of white space should not be tolerated.

By the way, if you look under "edit your profile" on Change.org this website makes the misleading statement under your last name field: "* Only the first letter of your last name will appear to members outside your network."  It clearly shows your full last name when you post a comment so I switched my profile to only include the first letter of my last name which was the impression the site left me with when I registered.

Happy Changing! 

 Luc, It is a great initiative from Lending Club to make affordable loans  to American families & small business  . I support it totally!

@ Randy ~ The supporters are listed here: http://uncrunch.org/uncrunchAmerica/about.action

Great Idea, I think this is what America needs right now!

So, after the Fed injected hundreds of billions of dollars into financing companies, they had tons of liquid. And they didn't loan it. Anyone here think about why they haven't loaned it yet before they voted for this?

If you haven't thought about why they haven't loaned it out yet, then you havne't thought about the credit conditions in the economy. The reason they're not loaning is because the credit situation is toxic. It's not that these financing companies are all A) jerks uninterested in making money, only interested in making sure you don't have a house, B) irrational and paranoid of a false poison in the economy, or C) poor. They have money, and rational reasons not to loan it.

A bank's incentive is to make money. If it's not making loans, it's because the loans won't make money--which means the loans will lose money. Why do you think the Gov't organizing a bunch of middle-class folks into loaning _their_ money is going to work better? Do you understand the credit market as well as these banks? Think your money will fare better than theirs?

This scheme is cute, but it's a disaster waiting to happen. You're going to make sure that people that can't afford to pay back loans will keep getting loans, and the American taxpayer is going to subsidize them, and then lose their money.

So for god's sake, go vote for something else.

@Eric Fogg - you raise a few points there that seem to reflect your own world view, and that is perfectly fine, but some corrections are required.

"Banks are not lending":  this is not a result of a toxic credit environment, whatever toxic is intended to mean other than something about loans in default.  Loan repayment is based on character and capacity to repay.  Social lending is not a vehicle to change that model.  The reasons for repaying a loan won't change.  Social lending will however bring a new vehicle to offer good loans, and here is why.

Banks are in an untenable position.  When you add in off balance sheet debt, they are showing debt to equity ratio's of over 20:1 and in some cases 50 or 100+ :1.  Rule #1 for banks is to recapitalise.  I assume you are familiar with the Velocity of Money concept - if banks recapitalise they cannot lend - lending and recapitalisation are multually exclusive. 

Social lending does not need to consider capitalisation.  The equity of each individual who is a lender, is reflected in their portfolio mix, and their risk appetite. You also have the beenfit of total transparency between lender and borrower, with risk spread amongst various borrowers and lenders.  In traditional banking banks take on 100% of borrower risk, and thats an untenable model.

Thats the short version that goes to say there must be alternative means for investors to participate in consumer debt alongside their other investments within a rational portfolio.  It will free up lending capital, and offer an alternative to the banks who have significant equity and commercial paper future losses to contend with. 

Social Lending is the way of the future!  

This is one of the best ideas to get our contry's economy back on track.   Hope you guys make it!

I am glad to see that the fake Scott's comment was removed. I have voted again and will mention the voting again at my website.

I'm already lending to other Americans by depositing my money in a bank.  Why is your scheme different?

You are so right but I beleive that the change must come from the private sector rather than the Fed's because they have created a habit that hard to break. We must find ways to take control and lead they way and in about five years they may follow. See my website and observe how I seek to deal with this problem. Your help and comments are solicited. http://www.axiomcapitalfunding.com . The site is a work in procees so view for the content and concept. Thanks

Best Regards,

Eugene Carter,CEO
Axiom Capital Funding,Inc

I haven't had any problem with borrowing at all because I have a credit score of almost 800. I earned that score by living below my means and paying my bills before I did anything else with my money. I grew up in poverty raised by my mother in a one-parent home in the stagflation of the 1970's so this economic malaise is nothing new to me.

This idea is just another hair-brained scheme that tries to deny the truth that many are going to painfully learn now; don't spend anything new what you make, and make your bills the first thing you take care of with your money. You may want to lam bast me, go put your heads in the sand, or whatever, but the truth is the painful truth.

People:

There are a number of p2p lenders in various modes of operation: Prosper, LendingClub, Loanio.  Prosper and Loanio are currently stalled waiting for SEC approval. IMHO any new p2p operation needs to go through the SEC for approval which takes months.

I'm a Prosper lender, handle is BigCowboy.  The major problem with p2p lending is controlling the default rate on loans.  Please read the forums listed below for more information.

http://www.prospers.org/wiki
http://loanforums.techccu.com/prosper/index.php

-BigCowboy

If Tobin Smith says this is a good idea, it must be OK.

Not sure if the restriction of maximum DTI to 25% is a good idea.  If a person is self-employed or retired, the income part of the DTI ratio is hard to verify.  Using W-2 forms is impossible, and previous tax returns would lead to wacko decisions.  (I retired from the Silicon rat race in 2007 and exercised a ton of stock options.  My income for 2008 is one-tenth that of 2007.)  Prosper allows borrowers to list with a "cannot calculate" DTI.

Another piece of information:  The webpage http://fred93blog.blogspot.com/2008/11/lendingclub-late-loan-stats.html
shows LendingClub performance on loans with commentary.

- BigCowboy

GREAT IDEA.THANKS FOR TELLING US.

Power to more people, this is a fantastic idea! We should let more people know about it.

I am a retired person who started lending on Prosper.com after winning a slot machine contest  on a cruise ship $1650 in November "07". This got me 32 $50 loans to get started.
  It is statistically significant to start with at least 30 loans inorder to not be wiped out by a handful of defaulters.
   So the fun began and I now have many more (my goal is 500 loans on Prosper.com equals 25K and 1000 loans on Lendingclub.com equals another 25K. I now have over 500 loans outstanding. Since my initial investment was "windfall" ,gambling money, I decided to limit sources of lending to this category. I have since Lent Bush's check ($1200) plus and Income Tax  refund of $4700, various commercial coupons,and cash rebates($5k+). In other words this lending is not for serious money, eventhough I now have 298 Current loans on Prosper and 262 Current loans on Lending club. Current loans are loans that are paying on time. I have 38 late payers on Prosper and 7 late payers on Lending club. Lending club has better results because they do not let sub prime borrowers (under 660 FICO score) on their websight while Prosper cuts off listing at(under 520).
  I've concluded that higher FICO score borrowers don't want to endanger their credit score by being a late payer!
  Since Wallmart announced that Fico scores will be checked on all employment applications, even for the most meanial jobs then then they can save on expensive drug testing by checking FICO scores first before testing. After all what Druggie has a good FICO score since they borrow beg and steal to support th habit!
  I now have loan values of over 19K in just 13 months.
    Remember, Prosper or Lending club only charge the lender 1% of your loan. I get on average 14% or 13% (-)  defaults. that is my only overhead! I am never taxed on the Principal ever! And I reloan it over and over again. There is No capital Gains Tax! And as soon as I pay Tax on the 13% interest, it becoms untaxable Principal! And unlike Banks I have No Buildings, ATM machines,Employees , Insurrance or Advertising and Legal Expenses.!
     Since my privacy is hidden from the borrower  by  webname, I will never be getting a sob story or a personal threat over  the  phone. I shouldn't anyway as I am helping people complete their dreams at less than credit cards charge. I'm also setting up a 3 year retirement annuity cash flow based on 3years of loan payments that  are continually being compounded by relending to my fellow Americans. Thus I'll never run out of money and I've had a great time with the only adult Video Game that pays every Day!
       I know through experience that this is a great IDEA!
                   Plasticman911

This is great as long as not one organization reaps the benefits. . .  Just weary of ALL financial institutions after what has happened. . .

OPEN LETTER TO ORACK OBAMA AND MEMBERS OF CONGRESS:

Although the following words from an article  written by Laurie Roth, a writer for NewsWithViews.com  http://www.newswithviews.com/Roth/laurie147.htm aren't mine, except for a few thrown in here and there they nevertheless portray my feelings to a T on the current financial delimma facing this nation

The only way we can deal with this economic crisis is not through bailouts but to remind ourselves who we are and what we stand for, realizing that this very serious economic downfall will most likely be in our face and pocket books for several years, bail outs or not! Why is this recession so serious? What is different with this one and the last several?

Over the last several decades of recessions and down turns we at least had a manufacturing base, growing productivity, and borrowing would occur against productivity that was building, not disappearing. Most of our industries weren’t employing thousands of people in South America, Mexico, India or China, or even worse, taking their headquarters there.

Now they are. Paul Roberts, former Assistant Secretary of the Treasury in the Reagan administration talks about how it doesn’t work anymore to stimulate consumer demand by lowering interest rates. People still won’t buy because this time around their debt is too high, homes are gone or going away and jobs are shaky. The International Seduction and Globalism has all but killed us!
 
With manufacturing disappearing, U.S. corporations selling out for cheap labor abroad, thus betraying our own work force, and American consumers buying a ton overseas it is really hard to stimulate with a bail out more people back to work. Hundreds of thousands of the great jobs are now overseas!

We are becoming a dependent nation for products and industry rather than a leader nation which we have always been. Why is this recession so bad and different? With all the peeling off our own skin regarding manufacturing, sending thousands of corporations and jobs overseas, and continuing the cult of more and more debt via Government and our personal habits, we have no where left to go. We have almost killed our self.

Other contributors to our economic nightmare :

The New World Order crowd has been pushing for an international, Unitarian type power arrangement regarding countries and their money supplies since the early 70s. In fact one of the New World Order ‘gods’ Henry Kissinger just recently came out and said that Obama had the perfect setting for the establishment of “a New World Order.” January 7, worldnetdaily.com highlighted a recent quote from him on an CNBC TV show “The president-elect is coming into office at a moment when there is upheaval in many parts of the world simultaneously.

You have India, Pakistan; you have the jihadist movement. So he can’t really say there is one problem, that it’s the most important one…….His task will be to develop an overall strategy for America in this period when, really, a new world order can be created. It’s a great opportunity, it isn’t just a crisis.” You realize of course but for reasons best known to yourself that the New world order crowd, aka Trilateral Commission, wants redistribution of wealth, unfair trade agreements, which they already spear headed like Nafta and Cafta.

They want the North American Union and Super Highway. Anything to tear down our ‘arrogant’ sovereignty and borders and open us up to the world’s neediness, products, terrorists and illegals. Spending more money and making more “rescue” debt isn’t the answer. If we want to preserve our country and constitution we must toughen up and reintroduce manufacturing and business again within our shores!

We should NEVER have allowed whole industries to ship over seas. We should dramatically cut regulation, taxation and litigation that would threaten industry and business to thrive again in the U.S. Nuclear and energy exploration and development could happen boldly if it could afford to do business here without being regulated, taxed or sued off the earth. What if we can’t compete with all the cheap labor in the world??? Then perhaps we should be the first in quality and innovative ideas again.

Using slave labor in many foreign markets because we must have what Wal-Mart has is stupid thinking and un American. Slavery is evil and wrong whether it was used for commerce in our country in the 1800s or used because of greed now in big business. It doesn’t matter what nationality is used for our greed, slavery is always evil.

We should also start a major campaign to buy U.S. products again. We must make our products higher quality and better than international products. Stupid and unfair trade agreements should be stopped and reversed. As it is now its 50/50 all right with trade….we get the sled up the hill and the world gets the sled down the hill.

This recession may dip into a depression and go on for quite some time until we change our worldview, reintroduce our manufacturing and innovative base again, stop our seduction and addiction to debt and cheap products and start taking pride again in being American! ABSOLUTELY NO MORE BAILOUTS PERIOD!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Sincerely,


Richard W. Firth
Mechanicsville, Va.

I would like to pitch in, but it would seem that Prosper and Loanio have gone inactive waiting on the FEC and I am legally barred from lending on LendingClub as a California resident making less than $100,000 a year...  There don't really seem to any other options for social lending (other than to family/friends) within America.

...It's a pity.

I would strongly suggest that the people who are interested in this subject join LendingClub now and join Prosper when it opens up for business again. As lenders!  IMHO, you need to get firsthand experience using your own cash to see how a p2p loan system functions.

-BigCowboy

P.S.  The following website allows a person to view loan statistics and the loan portfolio of any Prosper lender:

http://www.lendingstats.com

You can find both BigCowboy and Plasticman911 there.