So, last night, when I should have been sleeping, I had an idea. What if, instead of going to a bank to get a loan, you could ask a few of your Internet friends for a loan instead? Say you want $1000 for a new iMac, you go to some imaginary website and tell it how much you want. This website does a quick credit check to get your credit score, and then determines your interest rate based on that score. You agree to the rate, and your request is posted anonymously to the site.
Next, people with money to invest come to the site and see your request. Let’s say your agreed upon interest rate was ten percent. One person might see your request and agree to loan you $100. This person would then make nine dollars off of your loan when you pay it back. On a $1000 loan, at ten percent interest, the web site would take one percent for itself, and then split the remaining nine percent evenly between individual loaners based on how much they loan. If one person loaned the entire $1000, he would make a profit of ninety dollars off of that loan when you paid it back. If ten people each loaned $100, each of the ten would make nine dollars apiece. If one person loaned $900, and another $100, the person who loaned $900 would make $81, and the person who loaned $100 would make nine dollars.
I’m sure this has already been done somewhere, but it was a new idea to me so I thought I’d make a note of it. I’m not sure how this compares to micro-loans for businesses in third-world countries, or how it compares to Kickstarter, but I thought it was interesting. I imagine there would need to be government regulation, and some kind of federal insurance as well, for cases when someone defaulted on a loan. I’m also sure there would have to be some kind of protection against fraud, but again, this is just a fresh idea, it’s not well thought out at this point at all.
Who knows… maybe there’s something there.