WHILE collective borrowing is a common phenomenon both overseas and in western Europe, Slovaks are just discovering peer-to-peer (P2P) lending. Roman Feranec of Žltý Melón, an online peer-to-peer lending intermediary company, describes this model of lending as people who have money available providing it directly to those who need to borrow it, the SITA newswire wrote.
Banks and other traditional financial institutions are excluded from the process. Interest rates are set by lenders through auctions, which benefit borrowers by often being lower than what traditional banks offer, while at the same usually yielding higher returns for the lender. Lenders also select the parties they loan their money to, thereby reducing the risk of borrowers defaulting on payments.
The first intermediary company to spread collective loans en masse was Zopa in Great Britain back in 2005, the Pravda daily wrote. Nowadays such online intermediaries also operate in central European countries: Kokos in Poland, and Finx and Bankerat in the Czech Republic.