Virgin Money Brings New Twist to Peer-to-Peer Lending

Companies such as Prosper and Lending Club have provided a marketplace to individuals wishing to lend each other money over the internet, now Virgin Money hopes to formalize loans made between friends and family members.

Virgin money is a dramatic departure from other companies that facilitate peer-to-peer lending. With Lending Club and Prosper.com, there’s a marketplace of lenders and borrowers that are anonymously lending each other money with the company facilitating the loans. Instead of connecting a borrower with a lender they have never met, Virgin Money hopes to add some level of formalization to individuals that have pre-existing relationships that wish to loan each other money.

Let’s say you want to loan a friend or family member $5,000 for a car. More often than not the loan would be made just on a handshake and there wouldn’t be any documentation to speak of, a very shaky legal basis for the loan and very little protection to the lender. Virgin Money acts as a facilitator, draws up the loan documents, develops a repayment schedule and even services the loan for you. This means that Virgin Money collects the money electronically from the borrower and transfers it to the lender’s account.

Virgin Money offers two options, one called “Handshake Basic” for $99 and one called “Handshake Plus” for $199. The primary benefit of the “Handshake Plus” option is that it offers the ability to process payments from the borrower and transfers them to the lender electronically. There’s also a $9 fee for each payment collected.

One of the primary benefits of using Virgin Money instead of just doing a regular, handshake loan is to protect the relationship you have with the person borrowing money from you. Virgin money documents the process, makes everything crystal clear and legally binding. That way, there are no disagreements over the size, number and dates of each payment. If the borrower doesn’t pay their note, Virgin Money does the collections for the borrower.

Is the service worth your $99 or $199 if you plan on lending money to a friend or family member? It probably is if the amount of the loan is more than a thousand or so dollars. Lending money to friends and family has inherent financial and relationship risks, Virgin Money goes a long way to mitigate those risks, but there’s still the potential that the person doesn’t repay the loan or worse that your relationship is ruined with them.