Maryrose Fison: Personal finance just got a whole lot friendlier

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They used to be the preserve of spotty teenagers with too little homework and too many embarrassing photographs to share.

But today, social networks are no longer the sole preserve of exhibitionists and Generation Y, they have captured the world's imagination, united people from the farthest corners of the world and, with this, changed the way we think of personal finance forever.

Entrepreneurs, technology professionals and those with an interest in personal finance will flock to San Francisco on 25 January to attend a star-studded conference looking at the monetisation of social platforms. While the conference's subject may not immediately set the pulse racing, it is indicative of a trend towards online personal finance which marks a departure from more traditional centres such as high street banks and investment houses.

While the concept of peer-to-peer lending is hardly new, its relatively recent application to social lending networks such as Facebook, which has 500 million users, has ramped up awareness and, with it, the amount of capital available to every man and woman in Britain.

Take the Lending Club, for example. It was one of the first applications to be added to Facebook in 2007. To date, it has issued more than $200m (£129m) worth of loans, including sums just shy of $11.6m in November alone. UK-based social lending service Zopa is another provider, and the number of communal lending and borrowing sites with applications on social networks is growing at a staggering rate.

By linking these online applications to forums frequented by high levels of traffic, consumers get a direct conduit to services – and the potential benefits are huge.

As hundreds of thousands of Britons struggle to get a foot on the property ladder, with banks continuing to crack down on new lending, social networking applications have become a lifeline. Who would willingly choose to pay through the roof for an unattractive loan package when there are millions of social network users gagging to lend you their money for less?

The average rate of interest on a loan at the Lending Club over the past 36 months has been 9.22 per cent. On Zopa, the typical APR on a loan of £5,000 over three years is 8.3 per cent, and on Funding Circle a £15,000, three-year loan has an APR of 9 per cent -well below the 12 per cent a typical bank would charge.

And for those with cash to spare looking for an armchair return, the interest offered through these network lending applications isn't to be sniffed at either. In the three and a half years since its inception, the Lending Club has paid its lenders more than $15m in interest.

Yet this is just one dimension of what looks set to become a whole new sphere of personal finance.

Social networking sites now have whole pages dedicated to financial advice. The ethos at Wesabe.com, a social network dedicated to helping members improve their personal finances, is that pooling information enables consumers to make better decisions. Users post questions about how to improve their finances – such as how they can raise their credit rating, or save up to buy a house – and members then post their responses.

While this level of openness can give rise to inaccuracies, the transparency of the forums means members are able to make up their own minds about what advice they take without paying a premium for it.

And for those who want to take their understanding of money even further, the London School of Business and Finance last year launched one of the world's first Global MBA Applications, enabling members of Facebook to undertake the course via a series of online video lectures and web-based course material.

Social networking applications may still be in their infancy, but given the popularity of personal finance and online peer lending, their influence on our day-to-day activities looks set to take off this year.

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