Will peer-to-peer payday advance hybrid sites go too far?

With new websites offering payday advance lending through a peer-to-peer loan strategy such as The Lending Well beginning to emerge, instant cash loans experts have expressed concerns that a proliferation of hybrid lending sites may be going too far.

Peer-to-peer lending has been touted before as the end to conventional lending through traditional sources, with Andy Haldane, financial stability director for the Bank of England, remarking recently that the movement could spell the end of High Street lenders in the long run.  However, industry experts point out that the advantage of peer-to-peer lending is that borrowers can reduce their costs by leaving out the middleman, and investors can benefit directly from increased rates of return at the same time – and a peer-to-peer instant cash loan service such as The Lending Well has a massive disparity between lender investment return and borrower interest rates.

Investors in the new scheme can earn 12 per cent on any funds of theirs that are borrowed by customers – something that The Lending Well has been using to drive interest, as this is anywhere from three to four times the rate of return High Street banks and building societies currently offer on traditional savings products.  However, when borrowers are charged 2,464.8 per cent interest – with the lion’s share of the fees going into the website administrator’s pockets – industry experts question whether the middleman is being cut out at all in this new scheme; while the website’s operators are in business for themselves by facilitating peer-to-peer payday lending, detractors say they may be taking too large a slice of the pie.

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