Peer to peer lending is no longer sounding like a far flung idea conceived by idealists with no financial service experience.  Several companies, including Prosper and Zopa, are making inroads in the market and attracting the interest of venture capital investors.  One of the latest models, called Lending Club, is seeking to leverage the power of social networking to bring people together in lending transactions. 

The company launched a Facebook application in May which has been downloaded by about 15 000 users.  The social network backbone provides the opportunity for users to learn about each other and build trust before entering into a transaction.  Lending Club CEO says, “person-to-person lending works best in an a environment where people feel connected to one another, lending to friends and friends of friends.”  The trust based model may provide the missing piece that will allow peer to peer lending to take off.

So far the company has moved around $1 million in loans, charging a 3% commission.  Although, this may not seem like much revenue for Lending Club, the company is confidant that the concept will catch on.  Given Facebook’s young user base, who are infinitely more trusting of their friends than large financial institutions, Lending Club may be on to something.