Message Monday: Should Christians Invest in Peer-to-Peer Lending?
Peer-to-Peer lending is all the rage these days. It is a way for someone to loan another individual money over the internet, a concept that hadn’t existed before. Should Christians invest in peer-to-peer lending? I give my opinion on why Christians should not invest in peer-to-peer lending and suggestions on how they can help the needy.
Peer-to-peer lending is enables financial misbehavior
Lending money to someone, especially on the internet without a personal connections, does not solve the problem. Someone with thousands of dollars in credit card debt had a problem with overspending, not interest rates.
For example: One customer of a peer-to-peer lending site said “Getting engaged forced me to make some important financial decisions“. That is a good thing. His actions will affect his future spouse’s life. However, he continued with “so I consolidated several sources of debt with a single loan from Lending Club“.
Yes, lowering an interest rate through a peer-to-peer loan could lessen the monthly burden, but it does not pay off the debt. Borrowing money from a different source, such as peer-to-peer lending sites, could be hiding the problem, not solving it.
Instead, teach people financial responsibility. Show them how to budget or teach them how the envelope system works. Have them attend Financial Peace University or other financial literacy class. If you don’t know the person then why are you lending him/her money through peer-to-peer lending?
Don’t lend someone a “peer-to-peer fish”, teach them how to fish instead.
Investing wisely is not about making money off the needy
Everything comes from God and we are called to be wise stewards of His money. Earning interest is fine, but I have to question the method of how that interest is earned.
Putting the money into a savings account or online Money Market account will earn simple interest through banks. Investing in stocks or mutual funds is purchasing pieces of companies that are growing (or, conversely, dying).
However, expecting to earn interest on the loans made to individuals through a peer-to-peer lending site is making interest off of the needy. How do I know they are needy? If someone were able to borrow money from a bank or relative then they wouldn’t need a peer-to-peer lending site.
“Love thy neighbor as thyself” – Matthew [22:39] convinced me to look closer at my investments. Peer-to-peer lending just doesn’t fit my integrity model.
Peer-lender -to- pure-slave
The rich rule over the poor, and the borrower is slave to the lender.
Proverbs 22:7 says it clear as day! I am not a bank, I am a human being. If my brother comes to me for money I should not have him sign 35 pages of loan documents promising a set interest rate to be paid back in xx-months, I should give him my shirt.
Anyone who has two shirts should share with the one who has none, and anyone who has food should do the same. – Luke [3:11]. I do not wish to make my brother my slave, so lending to an individual is no longer in my vocabulary.
Giving money can be much more effective than lending. A peer-to-peer lending site doesn’t know how your “investment” is used but you have input on how your money can help someone in need.
BTW: If I have the ability to participate in a peer-to-peer lending site then I am able to give instead. Otherwise I shouldn’t be risking the money in this manner.
Peer-to-peer lending websites can give you a better interest rate on the money you contribute, but at what cost? A believer should consider who is being affected by this type of investment and the side-effects of their actions. I have been tempted to invest some of our emergency fund in a peer-to-peer lending site because of the higher returns.
It was only after talking to someone who had used peer-to-peer lending that I realized I wasn’t really helping anyone. I was enabling them to manage their debt instead of eliminate it. As a Christian, I’d rather teach them how to pay attention, not interest through a peer-to-peer lending site.