For a while, peer-to-peer lending platforms were going to be the next big thing. Instead of borrowing from big banks, we could borrow from each other, on platforms like Lending Club and Prosper.
But pretty soon big banks starting getting involved, and the loans weren’t really so “peer-to-peer” after all. Investors started using them as a way to profit from people seeking credit. Other attempts to democratize finance – like microlending and crowdfunding – have run into similar stumbling blocks.
A new platform called Puddle is trying something different: instead of applying for a traditional loan, groups of friends can contribute to and borrow money from a pool. Members start off by contributing at least $10, and can withdraw up to five times the amount they put in. They have up to six months to repay the loan.
The founders of the site say it’s ideal for short-term loans, such as catching up on rent or making a one-
time purchase. Loans between $200 and $600 incur a $5 monthly fee – just enough to incentivize early payback, but nowhere near the exorbitant amounts charged by payday lenders.
The real incentive, though, is simply to maintain trust among your lending pool. Since members are borrowing from among small groups of friends – whose identities are verified through social media and a bank account – there’s real social pressure to pay back your loans responsibly. If you don’t, you’ll be prohibited from borrowing more.
Puddle isn’t the only financial pool of this sort. Groups of friends and families have always found ways to pool financial resources. Some intentional communities – particularly egalitarian ones – may have shared accounts from which members can borrow and repay money.
But for communities that don’t have formal financial systems – or for groups of friends who aren’t local to each other – Puddle could be a great resource to streamline the lending process. Since it connects directly to your bank accounts, there’s no need to co-ordinate a transfer. And since you’re borrowing and lending from a group, no one individual is on the hook to chase down a borrower for repayment.
Have you tried out Puddle or other group financial resources? What pros and cons have you encountered? What other tools would you recommend?