Borrowers Ditch Banks, Turn to Peer Loans

As the banking pendulum swings from reckless lending to impossible-to-get credit, people are increasingly turning away from institutions and toward each other for loans, reports the Washington Post. The shaky stock market has made the peer-to-peer market ideal for investors, while borrowers happily trade credit card debt for interest rates as low as 4%.

"With this credit crunch, the timing couldn't have been better for this industry to really gain a foothold and grow," says one expert. Some $282 million in loans were floated through peer lending in 2006—a number expected to balloon to nearly $6 billion next year. The industry has grown so much that companies helping facilitate loans are now required to register with the SEC.