Josh Smith, a 30-year-old blogger on finance, was in the middle of a career change in 2009 when he sought to refinance US$8,000 in credit-card debt.
“At the time, I was making the transition to freelance,” he said. “When I asked the bank, they did not want to lend me the money because I was leaving a permanent position for freelance.”
Smith turned to the online marketplace Lending Club and had a deal within six days.
“Getting a peer-to-peer loan was incredibly simple,” he told reporters.
Led by companies such as Lending Club, which went public in December last year, borrowing money from other individuals and groups via Internet marketplaces has surged in the US. The volume of loans made through intermediaries like Lending Club has jumped an average of 84 percent each quarter since 2007, according to PriceWaterhouseCoopers.
Total loans reached US$5.5 billion last year and are projected to hit US$150 billion or more in 2025, the accounting firm said in a February report.
“Think of them as eBays for money,” Consumer Reports magazine said in January. “Just as eBay brings buyers and sellers together, peer-to-peer platforms bring borrowers in need of loans from [US]$1,000 to [US]$35,000 together with investors who want to earn better returns than those offered by banks.”
Peer lending platforms can give borrowers better rates than conventional banks, while providing investors a higher yield in an era of low interest rates. The interest rate varies with the risk and generally falls between 6 and 12 percent. Prospective borrowers are vetted as they would be at conventional banks, but the process is more rapid.
The firms that serve as intermediaries typically charge between 0.5 and 5 percent of the sum borrowed.
The market is booming for peer-lending brokers as banks remain cautious about opening up their loan books in the wake of the 2008 crisis and being pressed with tighter regulations.
California-based Prosper Marketplace has facilitated US$1 billion in loans the past five months and is aiming for US$3 billion this year, chief executive Aaron Vermut said.
“What I think changed after the crisis of 2008 is that the big banks really left a big vacuum in the lending space,” Vermut said.
To limit the risk for lenders, companies like Lending Club and Prosper split loans among different investors. The default rate is 3 to 4 percent, according to the Web site Lend Academy.
Goldman Sachs said earlier this month that 7 percent of the bank industry’s annual US$150 billion profits could be at risk from new credit sources in the next five years.
That is pressing conventional banks to refashion themselves to keep up with the new online competition.
“Emerging players will force the incumbents to change competitive behavior,” Goldman Sachs said. “We would expect pricing of products to adjust, driving potentially lower returns.”
Nessa Feddis, a senior vice president at the American Bankers Association, said large banks would adjust if demand for alternative lending stays high.
“The industry does not see it as a threat. It sees an opportunity,” she said. “Many of the banks are indirectly involved with peer-to-peer lending as lenders. Also banks, like other businesses, learn from the competition and evolve.”
However, Feddis said there was a need for regulators to ensure a “level playing field” between banks and the emerging class of financial players. For example, banks are kept to strict capital requirements not faced by alternative lenders.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last