Looks as though online lending (also known as peer-to-peer lending) gained steam as the credit crisis reached a fever pitch. That's the take from Economix, a New York Times blog. Most noteworthy, according to Economix, is that more traditional-looking borrowers may be looking to p2p for funding needs.
Previously, most of the online lending went to consumers with checkered pasts (and low FICO scores) -- pasts that made it difficult for them to tap traditional lending sources. Indeed, p2p's growth was choked off because lenders were less willing to lend to these kinds of risks. Growth trends, though, could be changing, according to Economix.
From the blog: In Credit Crisis, Some Turn to Online Peers for Cash (link here)
Devin Pope, an economist at the Wharton School of the University of Pennsylvania who studies p2p lending, told me that at Prosper the “fraction of funded loans going to individuals with higher credit scores has increased over the last year.” Interestingly, the total number of loan applications did not change. But better risks seem to be seeking credit though this nonconventional source. As a result, the volume of funded loans at Prosper increased by 41 percent from April 2008 to September 2008 compared with the preceding six months.
In the past, these p2p sites were seen as lenders of last resort. It'll be interesting to see if p2p sites, such as Prosper, are able to consolidate some of their recent gains -- and continue to pick up more customers who don't have the baggage that so many of the borrowers tend to sport at these sites.