Comments on: Peer-To-Peer Lending: The Free Market In Action http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/ Simple Principles for Intelligent Investing Tue, 08 Feb 2011 17:25:51 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: But… What Exactly is a “Stock”? http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/comment-page-1/#comment-709 But… What Exactly is a “Stock”? Sun, 10 Oct 2010 04:09:42 +0000 http://csinvestor.com/?p=386#comment-709 [...] at the Common Sense Investor, along with the odd post about complex adaptive systems and the SEC, we’ve also posted a bunch of individual stock picks and some quick guides for [...] [...] at the Common Sense Investor, along with the odd post about complex adaptive systems and the SEC, we’ve also posted a bunch of individual stock picks and some quick guides for [...]

]]> By: Mike http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/comment-page-1/#comment-529 Mike Tue, 11 Nov 2008 20:41:14 +0000 http://csinvestor.com/?p=386#comment-529 @Ryan, Risk is mitigated in a number of ways. Looking at Lending Club, for example, only borrowers with high FICO credit scores (640+) and low debt-to-income ratio (below 25%, excluding mortgage) are accepted. Lenders also tend to spread their investment over many loans, i.e. $1000 invested in one loan is much riskier than investing $25 (the minimum amount at Lending Club) across 40 loans. The other economic incentive for taking on the presumed higher risk is that rates are more attractive than many alternative investments. Higher risk, higher potential rewards. I haven't heard of dhanaX, but I know that investors at the other site mentioned, kiva.org, will not make money. There, the loans are repaid without interest. Lenders make loans on kiva not for the money they will make, but rather for the social rewards their loans may help to generate. @Ryan,
Risk is mitigated in a number of ways. Looking at Lending Club, for example, only borrowers with high FICO credit scores (640+) and low debt-to-income ratio (below 25%, excluding mortgage) are accepted. Lenders also tend to spread their investment over many loans, i.e. $1000 invested in one loan is much riskier than investing $25 (the minimum amount at Lending Club) across 40 loans. The other economic incentive for taking on the presumed higher risk is that rates are more attractive than many alternative investments. Higher risk, higher potential rewards.

I haven’t heard of dhanaX, but I know that investors at the other site mentioned, kiva.org, will not make money. There, the loans are repaid without interest. Lenders make loans on kiva not for the money they will make, but rather for the social rewards their loans may help to generate.

]]> By: Paul N http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/comment-page-1/#comment-528 Paul N Tue, 11 Nov 2008 17:43:56 +0000 http://csinvestor.com/?p=386#comment-528 You do not provide any evidence that this so-called "free market" is actually working. Instead, you only provide the total amount being lent. What is the default rate on these loans? What is the average profit? Perhaps the reason it works is because many of the lenders are not expecting to make a profit. Instead, they are treating it like a donation, which they may happen to actually get back. That to me is not a free market but a philanthropy. You do not provide any evidence that this so-called “free market” is actually working. Instead, you only provide the total amount being lent. What is the default rate on these loans? What is the average profit?

Perhaps the reason it works is because many of the lenders are not expecting to make a profit. Instead, they are treating it like a donation, which they may happen to actually get back. That to me is not a free market but a philanthropy.

]]> By: Venkat http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/comment-page-1/#comment-524 Venkat Tue, 11 Nov 2008 13:46:23 +0000 http://csinvestor.com/?p=386#comment-524 Economic incentive of keynes would not suffice.Personal contact is necessary.Such portals are not successful although they claim to be so.If the portal exists as an adjunct to a bank that may suceed.Otherwise risk is very high wiothout any gurantee or insurance hedge. Economic incentive of keynes would not suffice.Personal contact is necessary.Such portals are not successful although they claim to be so.If the portal exists as an adjunct to a bank that may suceed.Otherwise risk is very high wiothout any gurantee or insurance hedge.

]]> By: Caleb Nelson http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/comment-page-1/#comment-522 Caleb Nelson Mon, 10 Nov 2008 20:04:04 +0000 http://csinvestor.com/?p=386#comment-522 I agree with Ryan. I wonder how the risks are managed. Would someone have to run credit reports, and if something were to go wrong how are they insured. How are rates negotiated or payment plans secured.? There's a lot to wonder about. I wonder if you could do the same thing a little beyond the individual to small businesses. Caleb www.mefinanciallyfree.blogspot.com I agree with Ryan. I wonder how the risks are managed. Would someone have to run credit reports, and if something were to go wrong how are they insured. How are rates negotiated or payment plans secured.? There’s a lot to wonder about. I wonder if you could do the same thing a little beyond the individual to small businesses.

Caleb
http://www.mefinanciallyfree.blogspot.com

]]> By: stock message boards http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/comment-page-1/#comment-521 stock message boards Sun, 09 Nov 2008 06:32:22 +0000 http://csinvestor.com/?p=386#comment-521 Your correct ryan, I would as well and I feel exaclty the same. There has to be economic incentive for the lender to feel confident. Your correct ryan, I would as well and I feel exaclty the same. There has to be economic incentive for the lender to feel confident.

]]> By: Lauren http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/comment-page-1/#comment-520 Lauren Sat, 08 Nov 2008 20:19:27 +0000 http://csinvestor.com/?p=386#comment-520 Great article I just heard of P2P lending on NPR last week and must admit I fell in love with the idea. I immediately did some research ans decided to join Lending Club (better quality loans, for profit portfolio) and Kiva (to help 3rd world country folks, more of a good karma site). http://www.npr.org/templates/story/story.php?storyId=96547454 So far I'm impressed with these 2 sites, how come I did not know about this? Depending how this goes I will invest more, but I must say I'm a little worried after reading some horror stories from lenders at Prosper. have you used these sites? what is your experience? Great article

I just heard of P2P lending on NPR last week and must admit I fell in love with the idea. I immediately did some research ans decided to join Lending Club (better quality loans, for profit portfolio) and Kiva (to help 3rd world country folks, more of a good karma site).

http://www.npr.org/templates/story/story.php?storyId=96547454

So far I’m impressed with these 2 sites, how come I did not know about this? Depending how this goes I will invest more, but I must say I’m a little worried after reading some horror stories from lenders at Prosper.

have you used these sites? what is your experience?

]]> By: Jared http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/comment-page-1/#comment-519 Jared Sat, 08 Nov 2008 18:03:47 +0000 http://csinvestor.com/?p=386#comment-519 The only difference I see between micro-lending and payday lending is the interest rates charged. There is a new peer-to-peer platform that will be launching soon at http://www.yadyap.com. This p2p site is designed specifically for p2p payday loans. The objective is to deliver dramatically lower payday loan rates to borrowers, while allowing everyone to participate in payday lending. There will be a good financial return as well as a great social return. The only difference I see between micro-lending and payday lending is the interest rates charged. There is a new peer-to-peer platform that will be launching soon at http://www.yadyap.com. This p2p site is designed specifically for p2p payday loans. The objective is to deliver dramatically lower payday loan rates to borrowers, while allowing everyone to participate in payday lending. There will be a good financial return as well as a great social return.

]]> By: Ryan http://csinvestor.com/peer-to-peer-lending-the-free-market-in-action/comment-page-1/#comment-518 Ryan Sat, 08 Nov 2008 14:22:06 +0000 http://csinvestor.com/?p=386#comment-518 I'd be interested to hear a bit about how risk is managed in P2P lending. That's my biggest concern. As you note, big banks and governments handle risk by simply not lending to the poorest of the poor. Presumably, part of the risk management is handled by size of the loans and the decentralization of the risk. But for a system like this to work, there has to be economic incentive for the lender to feel confident he or she will make some money. I’d be interested to hear a bit about how risk is managed in P2P lending. That’s my biggest concern. As you note, big banks and governments handle risk by simply not lending to the poorest of the poor.

Presumably, part of the risk management is handled by size of the loans and the decentralization of the risk. But for a system like this to work, there has to be economic incentive for the lender to feel confident he or she will make some money.

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