Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Canada’s most-awarded
newsroom for a reason
Stay informed for a
lot less, cancel anytime
“Exemplary reporting on
COVID-19” – Herman L
per week
for 24 weeks
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Renaud Laplanche, third from right, Founder & CEO of Lending Club, embraces company CFO Carrie Dolan during opening bell ceremonies of the New York Stock Exchange, to mark Lending Club's IPO.

Richard Drew/The Associated Press

This is part of a Globe series that explores our growing dependence on credit – from the average household to massive institutions – and the looming risks for a nation addicted to cheap money. Join the conversation on Twitter with the hashtag #DebtBinge

As Canadians rack up credit at a record pace, a new type of lender – with a technological twist – is emerging as yet another borrowing option.

Positioning themselves as an alternative to more traditional, high-interest options, online loan providers – commonly referred to as peer-to-peer lenders – are looking to shake up Canada's consumer-lending business in the way travel website and mobile taxi application Uber transformed their industries.

Story continues below advertisement

And consumers are buying in.

Online lenders entered the Canadian marketplace six months ago with the launch of Grouplend Inc., a Vancouver-based firm, has seen $60-million in loan applications since January. While the firm hasn't released numbers of how many of those loans are approved, it's clear that consumers are looking for options. A second provider, Borrowell Inc., launched its platform last month.

"We are looking at middle-class prime-quality Canadians," says Kevin Sandhu, Grouplend's founder and CEO. "We believe we provide an alternative to the mainstream financial services that are overpriced, poorly constructed and inconvenient for many Canadians."

Globally, online providers have enjoyed rapid growth. In the U.S, LendingClub Corp. and Prosper Marketplace Inc. had facilitated $9.3-billion (U.S.) and $3-billion, respectively, in online loans as of March, 2015.

For many, particularly millennials who are already adopting mobile banking and robo-adviser platforms, the idea of online borrowing represents a logical evolution.

The concept behind Uber-like banks is fairly simple. Providers of capital are connected online with individuals looking to borrow.

Canadians can apply for loans up to $35,000 (Grouplend caps loans at $30,000). But to qualify as a borrower, you must have a credit score of at least 660 for Borrowell and 690 for Grouplend.

Story continues below advertisement

Through a calculated algorithm, the platforms are able to assign risk ratings to each applicant. After answering an online questionnaire, a personalized interest rate is determined. The rate not only factors in an applicant's credit score, but also credit history, employment income and how much credit the person has available.

Borrowers also need to have a history of making debt repayments on time.

Interest rates range anywhere from 5.9 per cent as high as the low 20s, with the average interest rate hovering around the mid-teen mark (much lower than what most banks and credit card companies are offering).

Payments can be made over a three-year period, or paid out early without a penalty.

For those looking to invest, the process isn't quite as simple.

In Canada, regulatory requirements restrict who can be a provider of capital. At the moment, only institutions and accredited investors can invest funds to the platform, although this could change over time, says Mr. Sandhu. An accredited investor generally has to have minimum individual income of $250,000.

Story continues below advertisement

For those who do qualify, investors in this asset class typically earn 7- to 9-per-cent net return after fees. But if a borrower fails to repay, the investment is at risk.

To ensure those applying for loans are meeting certain requirements before they are approved, the transactions are managed by intermediary parties.

Not to be confused with online payday loan providers, marketplace lenders are targeting a niche clientele. More than half of the online applicants in Canada are looking for lower interest-rate options to pay off high-interest debt.

"A lot of people are asking 'how do I get out of this debt?' We think there's a lot of talk about the problem and less about the solution," says Andrew Graham, CEO of Borrowell. "Unlike a credit card, a loan from Borrowell gives you a personalized interest rate. The more diligent you have been at paying debt in the past, the more you will be rewarded with a lower rate."

But there are risks.

A 2014 report by the payday lending panel stated there is an industry concern that the growth of online and mobile borrowing may lead to more spontaneous or impulsive borrowing by consumers. In addition, because these online services may be easier to access than a physical store, borrowers may be less likely to consider other options before taking out a loan.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies