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Review Summary: Though it remains to be seen how many lenders it will attract, October-launched Loanio is the new BFF of poor credit risks with its panoply of tools aimed at boosting less-than-stellar borrowers. Pro: Has the best and biggest selection of borrower-friendly tools of any social lending site. Bidders enjoy control in a Prosper-like auction format. Con: Borrower fees a bit onerous. Rating:  (3 out of 5 stars)
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[Update 3/31/11: Loanio has announced they are shutting down their operation.]
It’s everybody into the pool at egalitarian Loanio, where even borrowers with no credit history at all can request a loan.
Quick Stats
| Best social lending community for | : | Borrowers with poor or nonexistent credit |
| Loan size | : | $1,000 – $25,000 |
| Loan duration | : | 3, 4 or 5 years |
| Interest rates | : | 7 – 22%, set by an auction process wherein the borrower offers an interest rate and lenders bid it down. |
| Borrower requirements | : | Must have an Experian VantageScore of at least 569 (rated E by Loanio) or a coborrower rated E or better. |
| Minimum investment | : | $50 |
Likes:
Optional verification documents. Borrowers can make their loan request more attractive to lenders by paying an extra $35 for a Platinum Verification Listing which includes proof of photo verification, proof of income via tax documents, a bank statement, paystubs for employment and salary verification.
More time to pay. Borrowers needing more time to pay off loans can choose the four- or five-year option instead of the standard three-year loan.
Partially funded loans. One of the few social lending communities (the other is LendingClub.com) where borrowers can claim a partially funded loan if the two-week period allowed for full funding elapses, Loanio gives the go-ahead at 35 percent.
Dislikes:
Longer loan terms with no secondary market. Loanio’s largesse toward borrowers means lender money can be tied up as long as five years.
Easy for borrowers to pile up the fees. The loan origination fee already starts at 2 percent ranging to 3 percent (whereas other sites charge 1-3 percent). Loanio charges another 1% if there is a coborrower, and jacks up the interest rate by 1% if borrowers use bank drafts instead of automatic debits to make payments.
Bottom Line. Borrowers with bad credit should run not walk to Loanio.com, the most forgiving of all the social lending sites thus far. Everything is geared toward making sub-prime borrowers feel right at home except possibly the fees, and even these are not onerous when compared with the practices of predatory lenders.
