More on the current opportunity for P2P lending

Paul writes about P2P lenders seeing a silver cloud in the sub prime mortgage crisis, and subsequent fall out.

I wanted to expand a little, on why I at least, believe that to be true.

Banks have many influences on their lending practices, andgenerally, only one of those influences is under the direct control of the borrower.  That would be the borrowers credit history.  Other influences felt by the Bank, are, central bank activity, wholesale markets, economic trends, portfolio performance, portfolio mix, bank profitability, and competitive pressures.

The result is that Banks can and do turn their lending practices on a dime, with apparent sudden alterations in risk tolerance, resulting in internal memo's to staff.  It can feel to a consumer as quite knee jerk.  These reactive policy changes are often a result of activities on the 'edge', but the middle ground borrowers and savers, are the ones who feel it too.

Social lending as the opportunity, to smooth out those reactive policy changes.  Lenders have circumstances that will drive their behaviours, as do borrowers.   The opportunity for those middle ground, average borrowers and lenders, is for a more ratonal, and simple to understand approach.

Time will tell.