When you need cash and want to apply for a loan, you probably will think of the banks, credit unions, private loan lenders or even credit cards. Actually, there are other kinds of lending services that can help you get a loan—social lending. Social lending, or person-to-person lending, or peer-to-peer lending (or P2P lending), is a certain breed of financial transaction which occurs directly between individuals without the participation of a traditional financial institution like a bank, a loan company etc. This model connects borrowers with lenders through an auction-like process in which the lender willing to provide the lowest interest rate “wins” the borrower’s loan.

The most famous and popular P2P lending companies are: Prosper, Lending Club, Virgin Money, Green Note and Fynanz (primarily focuses on student loans). However, I just noticed that there is a new company participated in the social lending club just on October 1, 2008. The name of the new P2P lending service is loanio. The launch of loanio was first reported in July 2007. However, it takes about more than 1 year for them to prepare the lending service to US consumers.

In general, Loanio is an auction based, peer lending platform where individuals can borrow or lend money to each other. By cutting out “traditional lenders,” and adding an auction based element, borrowers can get lower rates and lenders can get higher returns than other banking options.

The major difference between Loanio and other social lending services is Loanio introduces the concept of co-borrowers. It’s just a co-signer on a loan. It makes the loans less risky for the lender to take and also makes the loans easy to get funded. Loanio also offers enhanced pre-verification process which allows borrows to boost their credibility by submitting the following documentation in advance of posting their listing:

• Photo ID
• Income documentation
• Bank account statement
• Employment documentation
• Postal address documentation

Loanio also offers longer loan terms—up to 5 years.

Current interest rates are generally low. If you have some free money to invest, I would strongly suggest you try some P2P lending services. Sometimes you can get as high as 15% APR!

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