Social borrowing on the horizon

Not finding a mortgage lender you like? Try borrowing from a friend – or several of them – instead. According to reports, a new platform called Celsius could make P2P mortgage lending a viable option.

Peer-to-peer lending (P2P mortgage)

Using blockchain technology, Celsius is in the process of building a peer-to-peer lending network specifically aimed at the Millennial market. According to Alex Mashinsky, founder of the company, the platform will allow younger buyers to secure funding using their social circle, rather than big banks and financial institutions.

“I created Celsius to enable Millennials and Gen X to join the crypto revolution, leverage their social network to create a digital credit score and learn how to earn interest and get loans at much lower rates from their peers, “Mashinsky said.

“The banking industry as it is currently formulated fails to offer any real solutions to the current consumer credit and high-interest student debt crisis. Banks have no incentive to fix the problem, as the majority of their profits come from these loans.”

According to Mashinsky, financial credit is getting more difficult to come by for today’s youth.

“I have six kids and I am very concerned about their ability to succeed in the world where financial credit is harder and harder to get and the costs are growing higher and higher,” he said.

The nitty gritty

So how will it work? To start, each user creates a digital profile. They’ll need to upload FICO scores, online transaction histories and other non-traditional financial data. Then, Celsius will assign each profile a credit score that’s unique to the site.

According to Coin Journal, the ultimate goal is “to encourage the creation of a community of lenders and borrowers with lower loss factors and higher on-time payments, enabling greater credit limits at lower interest rates.”

The blockchain news site also reports that “Celsius will allow members to lend to other members and earn higher interest than they could get with a bank term deposit, while borrowers get lower interest rates than they would pay on bank loans.”

To protect lenders, Celsius will offer insurance that covers a percentage of the principal loan amount in case of default. The company will also recover any money owed to the lender or lenders involved in the transaction.

Today’s mortgage rates

A prototype of the Celsius platform will launch next month. In the meantime, get a feel for what more traditional lenders have to offer in terms of mortgage rates.