New Facebook App set to take on Payday loans in the short term finance sector

An innovative App has been launched that has sampled ideas of Peer-Peer finance to create a platform in which Facebook friends can form loan agreements and borrow money.
ëAgree Ití, is a completely free and easy to use App that enables people who are friends on Facebook to send applications to their friends for a loan, and enables both borrowing and lending parties to form arrangements that are mutually beneficial in financial terms.
Borrowers are able to benefit as they will likely be offered more competitive rates on their loans than on other short term finance mediums such as Payday loan firms, whilst lenders will receive a greater return on their loan than they would from the torrid savings account offerings on the market at the moment. 
It is hoped that the new App will pose a genuine challenge to Payday loan firms in the short term finance sector, and will prevent people from acquiring high interest, unsecured loans from alternate sources.
Many elements of the new app are very similar to Peer-Peer lending sites such as Zopa and Ratesetter where both lending and borrowing sites benefit from more competitive rates and the site itself takes a small commission for processing the arrangement and applying all the necessary credit checks for the loan to go through.
However, unlike P2P firms, the credit check aspect of the loan agreements on ëAgree ití may be bypassed and instead based on evaluation of past loans that the borrower has taken out through the app. Moreover, much like Peer to Peer the app suffers the same shortfalls in the sense that it is not financially regulated so lenders will have to base their repayments purely on trust rather than having insurance that they will get returns on their investment. 
Omar Fansa, founder of the app, said: "Poor credit ratings and a reluctance to ask for help closer to home means UK residents are increasingly taking on unsustainable debt that ruins lives. By seeking and offering funds within our social network, we can sidestep expensive credit and poor deposit rates and enable borrowing between friends and family at affordable rates.î
ìThe app offers people the chance to support others within their social network and gain a financial return."
It can be argued that with interest rates being far more competitive on loans being distributed through the app, that they offer an attractive and financially superior alternative to Payday loans, with borrowers having more flexibility and less financial pressure than they would do with the short term finance firms.
Nevertheless, the lack of insurance that lenders must face when distributing loans may cause enough apprehension to sway people away, as many will reason that those with poor credit ratings will be high risk people to lend to.
Moreover, the existence of two other relatively lost cost finance mediums in the form of personal loans and credit unions may inhibit the expansion in the popularity of the app.
The current best personal loan on the market has a rate of 7.8%, with Sainsburyís bank enabling borrowers to acquire a £500 loan at under £5 interest. However, as with all bank loans, the issue is that everyone is required to possess an exemplary credit rating, and it is for this reason that short term finance mediums such as pay day loan companies have garnered so much exposure in recent times.
It may also be worth looking out for your local credit union, as these mutually binding organisations offer loan rate loans between 25 to 60% to those who live in their area or have a body of members in the same employment.
The number of credit unions is expected to soar in the next few years, with the Archbishop of Canterbury identifying his intention to try and improve quantity and awareness of the organisations in a bid to tackle the countryís endemic personal debt problems.