IOU Central launches person to person online social lending service

When someone applies for a loan, the company’s proprietary IT system carries out real-time authentication checks and accesses credit reporting data. The customer is then put into a risk band. The basic idea is that when someone needs money, others will pool their funds together and lend them to the person at x% interest rate. An individual needing a small loan posts his loan request on IOU Central’s loan listing board. The loan request includes the person’s credit score, the amount to be borrowed, the term of the loan, and the maximum rate chosen to be paid. The borrower can also provide additional information such as his income and housing expenses which IOU Central can use to derive the debt-payment-to-income ratio and housing-expenses-to-income ratio. Lenders then bid on the loan request by mentioning the amount they are willing to lend and the rate they are willing to accept. When the listing ends, the bids with the lowest rates are combined together into a single loan, and IOU Central transfers money from all the lenders’ accounts in to the borrower’s account. On a monthly basis, IOU Central withdraws funds from the borrower’s account and deposits them into the accounts of the lenders until the loan is fully repaid.A borrower can apply for a loan between of CAD 1000 (USD 993) CAD 25.000 (USD 24.834) for a term of up to three days, while the lender can bid on a loan in amounts ranging between CAD 25 (USD 24.8) and CAD 25000 (USD 24.834). IOU Central will face Canadian competition from two other Canadian online P2P lending services, CommunityLend and Peermint Lending. Prosper in the US and Zopa in the UK are similar P2P online lending services.