Creating a Line of Credit With Your Friends? There’s an App for That

> Posted by Center Staff

Borrowing money from family, friends, or acquaintances is nothing new, of course. Whether it’s a spur of the moment decision or a more structured arrangement, sidestepping a formal financial institution for at least some of your cash flow needs can be attractive.

The technology community has started to recognize an opportunity in entering this space. Puddle, a smart phone application-based service that allows you to create a “bank” with your friends, was launched late last year.

With Puddle, you and your friends form a collective bank, contributing funds, deciding who can be members, and what the borrowing interest rates will be. The service is set up so that the profit made off of interest is distributed back amongst group members. Puddle is still in early launch stages, but currently you can request an invitation to try it out. Here’s a screen shot of what the browser-based interface looks like. It’s advertised that no fees or applications are associated with the service. A similar smart phone application-based social lending service, Lendstar, currently in beta, was launched earlier this year.

Would you be willing to use an app service and lend money to your friends? One detail that isn’t clear for either app was what happens when someone defaults on their loan repayments. An important detail…depending on who your friends are.