In a release so delayed that it made the latest installments of Rocky and Indiana Jones seem like nothing, Loanio has launched. If you go back to the darkest corner of your memory you may remember that Loanio announced it will be a peer-to-peer lending company intending to compete with Prosper and Lending Club. I would mention Zopa in the conversation, but in the US they are not a peer-to-peer lending company. My only interest in them was their potential of negative interest rates, but I’ve found that it’s not practical. I couldn’t even lower my interest a half point with a pretty sizable audience.
I had long been looking for the peer-to-peer industry to grow into it’s own. I reasoned that it makes that margins could be better if people acted as their own loan officer. I also reasoned that being a loan officer can’t be all that difficult if you are diversifying your risk. Well, Prosper had some missteps. Lending Club had more as they’ve effectively had their doors closed over the last 6 months while, popular rumor has it, they catch up with the regulator’s regulations. So with Lending Club down, the industry needed another player… and it looks like Loanio is finally ready to step off the bench.
So what sets Loanio apart from Prosper? I’m glad you asked. The biggest thing I’ve noticed is that they introduce the concept of co-borrowers. You probably don’t need to click on the link to figure out what this is. It’s a co-signer on a loan. It make the loans less risky for the lender to take. While that sounds good to me (especially because I’m lender on Prosper and Lending Club) why on Earth would someone want to be a co-borrower? What’s in it for me? I guess the answer to that is friends do it to be a good friend. Plus if you default and cause your co-borrower to have to pay off your loan, you are probably setting yourself up for a few free punches to the face. Maybe that’s enough incentive. What if the co-borrower doesn’t pay though? After all, he would want to pay even less than the original borrower as he didn’t receive any money in the first place.