Social Networking helps Peer-to-peer lending loan $300+ million in 2 years

Above is an article about the facilitation of loaning and lending through internet social networks. In light of ever increasing loan rates, peer-to-peer lending has grown popular in moving money from individual lenders to those looking for competitive loan rates. The biggest name in peer-to-peer lending, Virgin Money (formerly known as Circle Lending), has handled over a hefty $200+ million. Online Banking Report (a research firm) expects that peer-to-peer lending will amass as much as $1 billion in funding by as early as 2010. There is also speculation that funding can top $9 billion in less than a decade in 2017. For those Facebookers reading this blog, peer-to-peer lending has even found itself in Facebook via facebook apps.

The concept is simple. Sites such as Virgin Money facilitates the loaning of money between individuals for a small service fee (as low as less than 1% for lenders and less than 2% for loans). From there, individual lenders and borrowers are free to exchange money. Borrowers win in two ways: They have an alternative to conventional loans and they choose from a large market of peer-to-peer lenders. Meanwhile lenders can earn about %7-18%.

The reason why I share this article is that the rise of peer-to-peer lending looks like triadic closure in action. It can be said that we are all have strong ties to banks. I keep most of my money at the Bank of America. Meanwhile, my bank uses that money to loan to clientele. Those clients and I have strong ties to the bank. By triadic closure, it would be natural that I have a tie with at least one of those clients taking a loan from my bank. After all, why don’t I just lend directly to those clients? Aside from the gross oversimplification of the situation, peer-to-peer lending is the answer to this question.