Have you ever given out an IOU? Perhaps to your best friend, brother, sister or neighbour down the street. IOU Central is the first peer to peer lending and borrowing system in Canada. Launched yesterday, IOU Central has already attracted a good deal of attention from people looking to borrow money and others to invest.
Borrowers are people who need money for anything from appliances, vacations and even filming a short film. You can borrow between $1000 and $25000 for terms up to three years. As a borrower you state how much you are looking to borrow, term of the loan and max interest rate you are willing to pay. Borrowers are given a rating based on their credit score which is handled though a third party. Then lenders search though the available loans and bid on the loan they are willing to finances. With a bidding process borrowers are able to get better rates then they would get from a typical bank.
The loans are unsecured (like a credit card), if the borrower doses not pay then it is sent to a collection agency and a report is made to the credit burial.
“At its core, IOU Central empowers individuals to be their own banker by giving them a platform to lend money to whomever they want. It’s no longer just your local bank that can earn interest on your deposited money!” said Phil Marleau, Chief Executive Officer and Founder of IOU Central. “It also gives borrowers an alternative source of funds at competitive rates with no lengthy procedures to go through as are currently required at many traditional financial institutions.”
IOU Central charges borrowers based on their credit score from 1% to 3%, for lenders fee is based on the remaining principal balance owed and is charged at an annual rate of 0.5%.
How long do you think it will be until you see a crowdsourced credit card, debt consolidation or student loans?
It remains to be seen if IOU Central will be able to compete with the big banks in Canada but sure will be an interesting experiment.
Posted on Wednesday, February 13th, 2008 at 5:11 pm in the category:Crowdsourcing.
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