Several services at Finovate Startup are aimed at people who wish to cut banks and other financial institutions out of the loan-making and loan-receiving process–thereby reducing interest rates for borrowers and increasing rates of return for lenders.
At Lending Club, for example, lenders can shop around for personal loans to make based on information about what it’s for (often, for paying down credit card debt), the borrower’s credit rating (and how it’s trending), and the rate of return. Lending Club says it allows only the top 10 percent of loan applicants onto the site, and that as a result only 4 percent of the accepted borrowers have gone into default thus far. You pay a small percentage for the service–borrowers pay 2 percent on average, lenders pay 1 percent.
Other so-called peer-to-peer or social-lending services at Finovate included Prosper Loans (which has relaunched after initial difficulties with the Feds and offers features such as secured loans) and Pertuity Direct, a service that mediates the process by issuing loans to the borrowers it approves using funding from investors and lenders.