Social lending

Social lending is a type of lending where no mainstream banks are involved. Lenders and borrowers are able to choose who, at what rate, how much and over what terms they lend out or borrow money.

Social lending aims to provide consumers with a way of borrowing that bypasses financial institutions. It is a way of lending and borrowing online. One of the advantages is because there is no third party, fees and interest rates have the potential to be lower.

This makes up an online market place of lending and has become increasingly popular since 2005 as lenders and borrowers seek alternatives to mainstream banks that also pay higher returns.

Social lending is also known as person-to-person lending. One of the best known and most popular sites is Zopa.com which was voted most trusted personal loan provider in the 2010 Moneywise Customer Service Awards.

	Is social lending a creditable alternative? Do social lending and peer-to-peer lending companies offer a better alternative to traditional saving and borrowing providers and what are the potential pitfalls?
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