Who's the winner in the new peer-to-payday loans genre?

monopoly moneyPayday loans have been around for a while; so have peer-to-peer lending sites like Zopa (established in 2005). Now a new peer-to-payday hybrid has been conceived, which enables ordinary people to cash in on their less fortunate fellow human beings.

New site The Lending Well* offers investors the opportunity to lend between £100 and £250,000 to those in desperate need of cash in return for a return of 12% a year. The APR charged on the loans is, as for other payday lenders, expressed as a simple  monetary value of £1 per £100 per day, which works out at an eye watering 2464.8%

But is The Lending Well just ahead of the game? Payday loans companies are now everywhere and have made their founders millionaires. Peer to peer lending has also been very successful, with names like Zopa and The Funding Circle leading the way. Last month, even the Bank of England's financial stability director, Andy Haldane, suggested peer-to-peer lenders could ultimately replace conventional banks.

But the attraction of peer to peer lending is that you can cut out the (evil) middleman of the bank. Rates are fair for everyone and everyone is happy. Surely peer-to-payday lending is going too far? Multimillionaire Tim Slesinger, founder of The Lending Well, thinks not. "I'm not going to defend the payday loans industry as there are lots of things wrong with it," he told The Independent, "but we think we can offer better terms to responsible borrowers.

Mr Slesinger also said the business will turn down 90 per cent of prospective borrowers, turning down people with loans elsewhere, for instance. "We're not looking to lend to the financially vulnerable," he said. "We want this business to be ethical for borrowers and lenders." Leaving aside for a moment the ethics of payday lending at all, is Mr Slesinger really suggesting that anyone who already has some credit will be refused? This criterion is nowhere to be found in its terms of business, and its website is very clear in not mentioning it:

"If you can answer yes to the following questions:

Are you over 18 years of age?
Are you a UK resident?
Are you employed?
Do you have UK bank account and debit card?
Are you borrowing for an essential purpose?
Are you borrowing an amount you can afford to repay on your next paydate?then it’s likely you will qualify to borrow from The Lending Well."

So is Mr Slesinger just naïve in thinking that those without other loans would need this form of lending over other, cheaper forms of finance? Will The Lending Well really not lend to those with other loans? Who knows. But perhaps more importantly, will people really want to make big profits (with returns of around four times current savings rates) out of those in the deepest trouble? Wouldn’t that make us as bad as the bankers? Or should we stuff them in favour of our own bank balances?

Perhaps we shouldn’t be surprised- and if this particular venture weren’t set up by a “UK resident” with substantial offshore company shareholdings, presumably someone else would. After all, if you are the facilitator, taking 2,464.8% interest and paying out 12%, while risking none of your own money, you’d be daft not to.

*I have not linked to the site, not because am necessarily making any judgement on the site, but because their terms and conditions state “You may link to our home page, provided you do so in a way that is fair and legal and does not damage our reputation or take advantage of it, but you must not establish a link in such a way as to suggest any form of association, approval or endorsement on our part where none exists” and I didn’t want to be accused of seeking endorsement…


  • Dick
    I don't like the way they say nothing about loan defaults in the FAQ. There is the section on compensation, but again they say nothing about how much of the profits are put into this fund. But they do say that they can't guarantee all claims will be covered.
  • Sam T.
    @ Dick I agree- I have tried to find anything anywhere that quantifies how much goes into the fund, have read ALL the small print, but it seems to be entirely subjective. Suppose it depends how much of the 2452.8% profit the owners want to keep I suppose.
  • james d.
    agreed dick, if this is to be a real lender for the people they should be as transparent as possible. Of course the company running this site should get a cut but let us know where it is all going. So say I put in £100 If constantly lent out over 1 year this should generate £365 in interest, so what I get £12? Where does the other £353 go? I am not sure how risky this lending is and how expensive covering these loans is, is £300ish going into some kind of bond to cover defaults? I dont think so. This is a great principle but this implementation sounds like a rip off.
  • Issac M.
    I`m less interested in this bunch of bandwagoners, than I am the footnote. A search says 119k other websites use those same terms to say I cant link to them if I call them a cunt or otherwise disparage their good reputation. Does this have legal standing? Where is that BW bloke with the mask.....
  • Idi A.
    The site explain it isn't a bank, and it's patently not a charity, so if (big if) it's working like a credit union, what's the situation regarding paying tax on income from it?
  • Richard
    I think they mean you can't damage they're reputation by pretending that your site is endorsed by their site. Surely they can't stop you from linking to them if you're just explaining how shit you find them and not lying about the fact that they endorse you...
  • will
    i couldn't find typical rates of return either. just says up to 12%. you'd think under the 'meet george, our typical lender', it would show what he typically yields. i was hoping this would be a genuine alternative to a mid-term savings account (e.g. 1-2 years), but at this point it seems a bit of a gamble. @ Sam T/BW: what is your personal opinion about lending to sites like this?
  • Alexis
    Surely the payday lending market inherently lends to people with poor credit. High APRs to some degree offer them protection against the high number that will default. I can't see how a peer to peer payday company can wheedle out the poor credit risks and still be left with a large enough customer base. Zopa works because the credit requirements are tough - I have a mortgage and good credit, but I had to get my car loan through Zopa via my dad, presumably because age is a big factor for them.
  • Uncle P.
    UK based? Lending Well actually appears to be an Australian outfit linked to IGrin Financial Services pty. My main concern is the huge discrepancy between the maximum 12% p.a. interest paid to the lender (who appears to be taking all the risk) and the 1% per day charged to the borrower; even allowing for their overheads, the company will be raking in the moolah in bucketfuls.
  • Dick
    I'd grin too if I was charging 1% per day interest and paying 12% per year.
  • Dick
    Note also you only get interest when the money is leant to a borrower, not when they hold it. And you have no guarantee that the queue is fair when it comes to lending. Whose money is at the front of the queue when there is a "safe" borrower and whose is there when the lender is less safe?
  • Matt
    P2P lending is all about cutting out the middle man and matching people who want to lend and people who want to borrow at similar rates. This can't be achieved in the payday market so taints the whole of the P2P lending society. As is stated the site brings in £365 a year and pays out £12. The other thing is that 12% is based on your money being permenantly leant out, this isn't going to happen so you are probably looking at somewhere between 6 and 8% return whilst you take all the risk. Tell you what give me a grand, I'll lend it at 20% and give you 10% but if they don't repay I might cover your losses I might not. Not for me thanks!!!
  • Mike H.
    Fair play if you want to make a mint out of idiots spending beyond their means. The banks are giving you fuck all anyway. The burberry pound is worth a great deal. Get investing peeps!
  • Razor
    @ Alexis I'm a lender on Zopa and I've had people as young as 20 borrow money from me, so age isn't so much of a problem, I think it's just the tough requirements as you say.
  • Drew P.
    I stuck £50 into my zopa lending account. Then withdrew it because I realised how pointless it is and that I could earn more money by sticking a £50 bet on the fact that sunday comes after saturday :-P
  • ExCrement
    that 12% headline rate may well be a modest cut of the overall charge rate to lender but its still way above what you would get with other less risky investments. The fact is that reward reflects risk so those posters with thier ridiculous comments sbout guarantees and compensation need grow up. This is a gamble, and anybody looking to put money up shopuld regard it as a betfair type proposition, not try to make comparions with a high street investment vehicle/savings account. The haves will feed from the have nots, fact of life.
  • jj
    Nobody is surely stupid enough to provide them with all of the financing for all of the risk for almost none of the reward?? If my expected returns were 30% not 12% I would risk some money to see what happens, I also lend through zopa so know a 'little' of what this P2P industry is about. At 12% its just not worth the risk. Averaging approx 30% return, you can and will have to live with some defaulters, its all numbers. If someone said to me, John, you'll have to 'write off' a Billion pounds this year of your own money through defaulters, but you'll still show a profit off a million per year, is that ok? Too bl**dy right it is!!!! Its not about how much the default figure is 50p - to- £50billion, its if at the end of the day, your ahead or behind.
  • JR
    If I try to sign-up as a lender, and click "lend", the site takes me back to the sign-up page. So I have to put the minimum £100 in to find out whether the site is working, whether people are borrowing, and whether it is easy to get the money out again if not.

What do you think?

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