Prosper.com has reported it has generated about $200 million in social loans and has 840,000 members to date.

Virgin Money US (which was the former Circle lending business that Richard Branson invested in) has reported about $450 million is social loans to date.

In the UK it has been estimated that social loans might account for 10% of the total personal lending market by 2010.

Here is Australia we estimate the personal lending market to be about $30 billion and it is quite likely that over the next few years social lenders and P2P platforms will start to take a small share of this total market as has happened in the US and UK.

Of course unlike the US market Australia has fewer lenders in the personal loans market space and so competition is limited which leads to the higher interest rates that we see borrowers paying with less transparency. The social lenders such as Virgin Money US and Prosper.com are offering a consumer service that should help elevate the standards of the industry which, after the global financial crisis is evident is necessary for lending industries in many developed countries.

Our next post will look at the characteristics of some different investment asset classes.

The Lending Hub Team

We have been developing, coding and creating a peer to peer or social lending platform for personal loans between family and friends and today we finally go live!

Go to lendinghub.com.au to browse the site, or lendinghub.com.au/Info/AboutUs.php to learn a little bit more about Lending Hub in Australia.

Start a Loan Listing

Looking to borrow money from a friend or family member? Start at lendinghub.com.au/Borrowing/HowToBorrow.php to see how to create an online loan listing and start borrowing from your network of friends and family.

Want to Help a Friend with a Small Loan

Looking to help a friend or relative with a small personal loan that could make a real difference to their lives? The go to lendinghub.com.au/Lending/HowToLend.php to become a registered lender on Lending Hub and to bid on your friend’s loan. Remember that the borrower needs to create a loan listing on the Lending Hub loan market so why not send them a quick email first and get them online and listed!

Just Curious About P2P Lending?

P2P Lending is a truly novel and innovative concept that will revolutionise the way we think about money and lending. In the US, UK and Europe P2P lenders are taking off and proving to be extremely popular. This is a world wide phenomenon were consumers want an alternative to the traditional and old fashioned banks…and now its available in Australia.

See our information site for more help - Lending Hub Help Centre.

Alternatively browse the Lending Hub Blog which is full of articles and commentary on the Peer to Peer loan industry.

Who Can Start a P2P Loan?

Anyone with an Australian bank account and who is over 18 years of age.

From the Lending Hub Team…best of luck with your loans and we hope you enjoy an alternative to the banks!

It’s interesting to note that the ‘big’ banks continue to be true to form and alienate their customers, the borrowers by hiking up interest rates (and fees) when times are tough.

These sort of price hikes come about due to a lack of a real alternative in Australia to the traditional big banks…many of the smaller banks and non-bank lenders have been bought out or have effectively stopped lending.

This is a good example of why we have launched the Lending Hub Marketplace for Loans…we seek to provide ordinary individuals the way to sidestep the big institutions and lend and borrow directly person to person. Borrowers and consumers will hopefully benefit from the introduction of an alternative of to the expensive and old fashioned lenders.

Lending Hub …where ordinary people set the interest rate!

Prosper.com the US peer to peer lender has recently announced the launch of a new loan exchange where personal loans can be traded on a secondary market. Interesting concept as the loans are originated by Prosper approved financial institutions and then traded on Prosper where lenders can bid the interest rates on these loans.

This open market is a further example of the effectiveness that digital platforms can have in setting fairer and more transparent prices and allow for more effective distribution of risk amongst a wider set of lenders. We’ll be watching and seeing how this new product and exchange takes off in the US and maybe consider this for Australian borrowers and lenders in due course.

In Australia it is still early days for the P2P loan market which Lending Hub is building and developing but in the US there’s a great deal of innovation being driven by the size of the market and the tightening of credit by the financial institutions following the sub-prime credit crunch.

Further Info on Prosper.com

For further details see Prosper’s info page Prosper Open Market.

Prosper.com reports on its site at http://www.prosper.com/welcome/marketplace.aspx to have originated US$178 million in personal peer to peer loans at about US$6,100 average loan size.

Australians like many other cultures have often turned to their closest resource when needing to borrow money without the involvement of a bank or institutional lender. A Circle lending community and market though is a fairly new concept in Australia in terms of a structured market for friend to friend and family to family loans. If you are looking to setup a loan in the family here are a few things to consider and organise first.

Formalizing Family Loans

Borrowing or lending to a family member can sometimes be a little difficult to setup as it can be process influenced by the emotions of close family members. After all how easy is it to ask a parent or a sibling for money!

Instead of just asking for a loan from your relatives and having to ask the difficult question, Lending Hubworks by  ‘formalising a family loan’ model. As a borrower you create a loan listing on Lending Hub and go through a quick application. At the end of the application you have effectievly created a formal request for a loan with a set repayment schedule, dfined interest rate and amount and you have stated the purpose and use for the personal loan.

Generating Interest in your Loan

The next step is to promote your loan listing to you family members (or close friends if you want to as well) by emailing them details of your loan listing on Lending Hub. Your family members can then view your commitment to the loan by viewing a loan listing similar to the ones at Lending Hub Sample Loan Listings.

Making it Easy for Your Family to Lend to You

Make it easy for your family to make the decision to lend to you by following a few simple points:

• State what you want to use the personal loan for and include some detail e.g. Loan for an Education Course
• Keep the amount you are asking for as small as possible by doing a quick budget of what you actually need
• Provide a little info about yourself…you’ll be surprised how often even people who know you forgot the specifics of your background!
• Set a reasonable limit on the interest rate, even if are prepared to pay a rate similar to a bank it will help show you are serious
• Be active in promoting your loan and need for a loan…persistance pays off

So instead of making vague promises and using the back of a napkin to borrow money from your parents or other family members, take an active step in formalising your loan.

Best of luck.

Now, not only does it take longer to get a home loan or personal loan from one of the major banks but the LVRs (loan to value ratios) they offer are lower and potential borrowers with any blemish on their credit history are effectively being locked out of the loan market, even if it something small such as not paying a phone bill.

We at Lending Hub have been developing our person to person lending platform to allow Australian consumers who are either finding it hard to get a loan from the banks or just want a better deal. Lending Hub will let consumers and borrowers tap into the power of their network of friends and family and borrow small personal loans from people thye know.

Similar to other circle lending networks individuals looking to fund personal expenses can apply for a loan listing on Lending Hub and then market their loan to their friends and family.

Friends and family (and even work mates) are more likely to lend to someone they know and trust and the reward is that borrowers are more likely to repay on time.

The GFC may have caused a credit squeeze in the short term in Australia but soon to be going live Lending Hub will offer borrowers another avenue for their loan needs.

See us live in April 2009!

You can also see information and how to pages at the Lending Hub Peer to Peer Information Centre.

We will soon launch the fully functional borrower and lender application forms that will allow users to register with us and to start borrowing and lending.

Stay tuned and look out for Australia’s newest banking experience!

The Lending Hub Team

•  How peer to peer lending works
• What you’ll need to provide during a borrowing application
• What you’ll need to provide if you want to start lending
• Information on Lending Hub’s credit grades (we’ll be processing borrower details to determine a credit grade for each borrower)
• How to create the best possible loan listing (for borrowers)

Check http://lendinghub.com.au/Info/Personal_Loans.php early next week for an update.

We are designing Lending Hub to be a truly online platform for matching borrowers and lenders rapidly without any of the hassles of a physical bank. To achieve this requires a high degree of automation and development of our compliance systems, which is where our focus has been for the past 2 months.

Secure Automated Processing

We are aiming to achieve virtually all processing of borrowing and lending applications online in real-time.  The Lending Hub system will check and process a borrowing application within less than a minute (assuming you have a traceable credit history and have provided all required information). Now instead of waiting at a bank or searching for your nearest branch we’ll be able to process your details in less time than it takes to grab a coffee!

If we require any physical documents (e.g. payslips or bank account statements) you can upload a scan directly to your Lending Hub account. No need to mail us anything (unless  you really want to of course).

Compliance

Australian legislation is quite explicit in the requirements for consumer loans, if you intend getting a loan (from any lender not just us) then check out The Uniform Consumer Credit Code at http://www.creditcode.gov.au/. This code is designed to protect consumers by clearly defining the terms of a loan and the loan agreement.

To meet our compliance requirements under the UCCC our loans agreements will be available for reading by the anyone prior to entering into an agreement or starting a loan listing on Lending Hub. This level of transparency is relatively unheard of in Australian financial services (after all how many banks do you know that show you the fine print before they process your application?). In addition we’ll clearly stipulate our fees and your obligations under the agreement.

No early repayment fees!

Most lenders in Australian will charge you if you want to repay your loan early…yes, that’s right! if you are a good borrower and have the money to repay early they penalise you with complicated formulas and more fine print.

Lending Hub personal loans will let you repay early the principal and interest you owe at any time (assuming you’re not behind on any repayments of course) without any additional fees or penalties!

Launch

At this stage we are trialling p2p loans with a private group of borrowers and lenders and except this will clear the site for launch in either August or September 2008!

We’ll keep you posted in the meantime with some interesting topics.

Lending Hub Team

When assessing the effective cost of a loan, you will need to consider a few possible charges and not just the interest rate. Other costs and charges can include bank fees and up-front or settlement charges. The comparison rate (also called Mandatory Comparison Rate or MCR or the Effective Rate) is an interest rate calculated by the lender that lets you compare the total cost of a loan between products and lenders. This total cost is expressed as an annual interest rate.

The Comparison Rate is calculated using a financial repayments formula that takes into account the amount and duration of the loan, the repayment frequency (e.g. weekly, monthly) , the interest rate and any fees and charges levied on the loan. As fees and charges set by lenders can vary between customers and products the Comparison Rate will help you compare many different types of loans, although it is important to remember that the cost or interest on a loan is just one factor that you should assess in determining whether a loan is suitable for you and will meet your needs.

Other factors that may increase the effective cost of a loan but are worth considering include the flexibility to repay early or redraw or the level of documentation required to obtain the loan.

Lending Hub’s P2p Loans

Lending Hub will provide Comparison Rates on all loans listed on the Lending Hub once we go live. The Comparison Rate is required under the Consumer Credit Code and the calculation for Lending Hub loans will include:

• The maximum interest rate as set by the borrow or average interest rate as set by lenders
• Settlement fees
• Any other fees we may charge to the borrower (currently nil)

Costs that are excluded are:

• Government and statutory fees
• Fees and charges that are event-based and may or may not apply throughout the life of your home loan, e.g. Late payment fees, redraw fees or early repayment fees

More Information on Comparison Rates

For more information you can visit the following sites that provide further information:

• www.creditcode.gov.au/content/downloads/factsheet.pdf
• www.creditcode.gov.au/content/mandatory_comparison.htm
• http://www.theage.com.au/business/money/tools/guides/banking/compare_rates.html
• Understanding Credit Comparison Rates (WA)