Is Sparo, Which Makes P2P Lending More Public, the Next Big Thing?

© Can Stock Photo Inc. / hjalmeidaA new social lending startup is asking friends to lend and borrow money from each other using its public platform.

Make that another new lending startup.

Social media is blurring the line between public and private financial information, so perhaps a service like Sparo shouldn’t surprise anyone. Sparo is a peer-to-peer lending platform where users form networks of friends with whom they can exchange funds. There doesn’t appear to be a reason to be on the platform other than to lend or borrow money. Here’s how the company puts it:

We’re creating a simple and legal framework for friends and family to come together and support one another. Sparo is the platform that will allow lenders to submit rates to potential borrowers in the marketplace. Rather than resorting to exorbitant credit card fees or seeking out expensive payday loans, borrowers will be able to leverage their network. We’re removing the discomfort of asking for money and creating a platform that will bring communities together.

The social lending aspect recalls similar ventures such as LendStar and Puddle. The appeal of borrowing from family and friends is obvious, but so are the drawbacks. (“Sorry, Uncle Jim, I’m sending you to collections.”) Risk is distributed across the network of lenders, and the difficult matter of asking friends to pay back what they owe is presumably handled in a skillful way.

“Your brand, your network and your reputation are your collateral,” according to Sparo. Here’s more from Sparo’s site:

57% of borrowers would have preferred to borrow from family or friends, according to a recent Pew Research report of payday [loans].

$900 billion of credit card debt in the U.S. with $140 billion in interest paid each year and another 20% of [Americans] don’t have credit.

10% fee of the interest set by the user will be collected by us.

P2P lending that relies on messaging, rather than a social network, (i.e. Venmo and soon Facebook Messenger), is clear and easy. But for larger loans that go beyond simple payments, a more complex mechanism is needed. Does Sparo help build credit, or provide some kind of financial education to borrowers? We’ve reached out to the company for more details on how they think their platform might help those in need of funds avoid credit cards and payday loans.

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