It is quite easy to turn on your family for help when it comes to family matters, personal issues or sharing with them your frustrations at work. However, when it comes to borrowing and lending money, things can take an awkward and embarrassing turn. How would you feel if a close friend or family member turns down your request for a loan? It is easy to let emotions get in the way of a supposedly objective financial decision, which is why it is better to go through a channel that allows you to formalize your loan between a family member or a friend. Social lending sites offer the ability for an individual to create a formal loan online and then invite family and friends to view and bid on the loan.
Once the loan is formalized it shows all the potential lenders that you are serious about the purpose of the loan and committed to making the repayments as you are accepting a full and legally binding loan agreement. In addition, this is a good way to formalize loans made between friends and family, so that the emotional elements is somewhat removed and does not necessarily take part in the financial decisions to be made.
There are two peer-to-peer or P2P lending sites which are currently suitable for lending and borrowing money between families and friends although they are based in the US and UK (Prosper and Zopa respectively) however Australia is catching up quickly and there are likely to be a whole range of online social lending sites some of which will be real online communities and networks and others that will be more process oriented (like CircleLending in the US).
Here at Lending Hub one of our express goals will be to make the formation and creation of loans suitable for the formalization of loans between family and friends. Once a borrower decides that it is from their relatives that they would like to get funded all they simply need to do is send them a link to the loan listing and their relative can jump online and place a bid. Repayments by the borrower will be of a formal recurring nature allowing the family members and friends who decided to lend to sit comfortable with the knowledge that the monthly repayments don’t need to be followed up on all the time. We are hoping that this will become a new and readily accepted market here in Australia!