Can P2P Lending Help to Loosen the Credit Crunch?

Uncrunch America offers consumers a package of tools to help them handle the credit crunchPeer to peer lending sites have undoubtedly had a more prominent role in the context of the financial crisis. “Uncrunch America” is a an effort by a group of P2P and social lending sites— namely Lending Club, Virgin Money, and On Deck Capital—to build an awareness campaign that aims to “help resolve the credit crunch and rebuild the economy by delivering consumers with secure, trustworthy tools and infrastructure to finance necessary expenses and make critical investments.”

Along with the three lenders mentioned above, the support team also includes providers of personal finance tools and credit education such as Credit Karma and Geezeo. ChangeWave, a global network of professionals, is also a part of the team and helps to provide marketing and public relations support.

What is this coalition’s secret weapon? By joining powers (read as bundling) they can provide useful and demanded services to the American consumer in this time of need. According to their website, since the start of the year Uncrunch has distributed over $US 74 million (this number represents the amount of money lent via Lending Club, Virgin Money, and On Deck Capital).

There is no doubt that the tightening of credit from traditional lenders has created an opportunity for social and P2P lenders. But are consumers grasping the opportunity presented by untraditional lenders? It seems that lack of borrowers is not the problem. However, two of the three lenders on the Uncrunch team depend on individuals to provide the finance for loans and in today’s worried financial picture it is no surprise that individuals might hold on to their money as tightly as banks. As with any investment, lending through untraditional lenders is a bit of a gamble but most people today have lost their appetite for risk.

Although Uncrunch America provides valuable services for borrowers, questions remain about how it can increase the supply of financing for loans. This is where the real “uncrunching” begins.

Flicker credit: Happy Haggis

Comments

[biaga]

The way things are going in the US, with banks tightening their lending practices, raising interest rates on credit cards to anywhere between 20 and 30% etc., I would not be surprised if P2P lending gains traction here as well. The only obstacle I see is that if I were to lend out money and the borrower(s) were to default on their obligation(s), the government might decline to bail me out. That is of course unless my P2P business grows so big that I become “too-big to fail”……

[Melody]

@Biaga
P2P lending is indeed beginning to gain traction here despite the risks that you outline, although the current platforms are obviously mere specks in comparison to those that fall into the "too big to fail" category! As you mention, the rates offered by p2p sites are a mere fraction of those offered by credit cards. It's true that these deposits are not FDIC insured and defaults are possible, so the deal to lenders may be less appealing. I think that most platforms are facing an excess of borrowers.