Would you like to borrow some bitcoins? If you are a fan of the idea, BitLendingClub has exactly what you need.
BitLendingClub is a peer-to-peer (P2P) bitcoin lending platform which allows borrowers to select specific loans that match their loan duration and interest rate conditions. BitLendingClub operates on the “Dutch Auction” principle, where lenders may set a starting interest rate for certain loans, but the loans are only lent out when the interest rate drops to a level acceptable by potential borrowers. Borrowers have the option of setting their own interest rates. They may also reject offers from potential lenders if they do not believe they are receiving a competitive interest rate.
Lending digital currency to unknown parties can be a very risky proposition. To reduce this risk, BitLendingClub uses Jumio to verify the authenticity of documents submitted by potential borrowers. BitLendingClub only charges fees on loans that have been repaid. It separates itself from other competitors such as BTCJam with its unique fee structure.
Co-founder and CEO Kiril Gantchev sees the unique fee structure as a necessary risk that will pay off in the long run, as bad borrowers are gradually weeded out of the system. Gantchev believes that the P2P lending space can only grow in the presence of respectable borrowers. If that requirement is not fulfilled, he believes the P2P lending business will not last very long.
For a company that launched in May of 2014, BitLendingClub currently boasts some pretty impressive figures. At the time of writing, the company currently has a 7.81% default rate, 1160 verified users, 4044 loans repaid, and a 12.42% average interest rate.
In March of this year, BitLendingClub implemented some new protection mechanisms to lower the loan default rate by placing a credit limit on all new borrowers. The new requirements place borrowing limits tailored according to every borrower’s annual income – the higher the income, the higher the credit limit.
“We believe that creating an effective default prevention is the foundation of a well-functioning lending community.”
Several financial institutions in the United States have been caught red-handed on many occasions when it comes to discriminatory lending practices. Gantchev sees digital currency P2P lending as a force for good in an industry that is rife with discriminatory practices and policies. If P2P bitcoin lending can take root across the world, he believes it will disrupt existing money lending businesses.
In October of 2014, European VC investors from LAUNCHub invested €200,000 in BitLendingClub, allowing it to relocate its headquarters to San Francisco. LAUNCHub is a Bulgarian-based seed fund established in 2012 that has invested in numerous startups in Eastern Europe.
In February of this year, BitLendingClub entered the Boost VC bitcoin accelerator program in Tribe 5, and will present its new offerings during a demo day on May 7.