Decades of profit gouging from the big banks of the world might be about to catch up with them.

Ever since the Global Financial Crisis (if not even before) people’s trust in banks has been eroding. Recent high-profile cases of fraud and misuse of funds have only exacerbated this sentiment.

But until now there has been no other alternative to using them.

Peer-to-peer lending began as a crowd sourcing idea with which to help poorer nations and areas. But the idea has taken hold in the western world and poses a real threat to the greed and arrogance of the banks.

Lenders such as RateSetter, SocietyOne, and MoneyPlace connect lenders to borrowers and have seen explosive growth over the previous few years.

RateSetter (launched in the UK in 2010) is now approaching $2 million a month in loans to Australia.

In the UK this is closer to $100 million a month.

“What we’re really doing,” said Daniel Foggo, CEO of RateSetter Australia, is introducing competition into the personal loan market. Typically our rates are 4 to 6 per cent lower than what he banks are offering.”

Lenders, meanwhile, see returns between 4 per cent on one-month loans to 10 per cent for five-year loans.

“Basically,” continued Mr Foggo, “we’re providing them (customers) access to a new asset class, which in the past provided them (the banks) great returns (that’s returns for the banks, no one else).

RateSetter charges a flat 10 per cent off the interest earned by lenders. Borrowers are charged a fee dependant on the term of the loan, usually between $200 and $300.

Most often borrowers take out loans for items like car purchases. The average loan amount is $6,283.

“At the moment,” said Mr Foggo, “the incumbent banks and lenders think they hold a lot of trust. But I think what we’re already seeing is that trust is moving to newer players.”

About The Author

Someone you can depend on to respect you and care for your dog. Let me help you give your dog the life it deserves.

Leave a Reply

Your email address will not be published.