"As the financial crisis becomes deeper and more challenging, even for creditworthy clients, it's hard to get funding," says Renaud Laplanche, the chief executive of Lending Club. "We're streamlining the process between those who have the money and those who need it."
The Lending Club registered with the Securities and Exchange Commission this fall, and its lenders can now resell loans they wish to relinquish. But another peer-to-peer company, Prosper.com, recently ran afoul of regulations and stopped making new loans while it undergoes an SEC review.
Peer lending has risks like any investment, but "the risks they (the lenders) have are based on their own individual criteria," says Hugh Bromma, the chief executive of Entrust Group in Reno, Nev. He says the company, which administers self-directed individual retirement accounts, has seen more lenders wanting to make peer-to-peer loans with IRAs.
Dave Jacobs, 50, of Cincinnati has lent IRA funds with Entrust Group's help and treats the transaction as banks would with borrowers. (The borrower's payments, including interest, are made to the IRA.)
But banks are still an option if consumers shop around, says Carol Kaplan, a spokeswoman with American Bankers Association. (Compare rates here.) "Banks right now are very much fighting for depositors as well as borrowers," she says.
This article was reported and written by Bao Ong for MarketWatch.
Published Dec. 26, 2008
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