Agree It: Facebook app helps you borrow money from your friends

Agree It is a new Facebook app which helps you request loans from family and friends through the social network. But is that actually a good thing?

A free Facebook app called Agree It has been launched, aimed at making it easier for people to borrow money from their friends and family rather than turning to more expensive forms of credit.

People can use Agree It to request a loan from one or multiple friends at “mutually agreeable” rates of interest. Omar Fansa, the brains behind the app, suggests that doing things this way means that people can “sidestep expensive credit and poor deposit rates and enable borrowing between friends and family at affordable rates”.

Fansa emphasises that Agree It is different from other social lending sites – peer-to-peer lenders like Zopa, RateSetter and Lending Works – as no credit check tools are utilised.

Instead, Agree It relies on “the desire to protect one’s reputation and the power of peer pressure to ensure agreements are honoured”.  In other words, make sure you pay your loan off on time or else you risk being named and shamed in all sorts of unpleasant status updates from your friends on Facebook.

And nobody wants that.

Peers rate each other following each loan, meaning you eventually build up a “social credit score”. Fansa says the app will make its money from advertising, rather than any fees charged to borrowers or lenders.

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The downfall of Quakle

It’s an interesting idea. But I can’t help being reminded of the now defunct peer-to-peer lender Quakle.

Quakle used to emphasise the social side of peer-to-peer: lenders could choose exactly who to lend to, based on why they needed the money. It was a nice, personal touch that attracted lenders and borrowers alike.

Trouble is, Quakle went bust, in part because of the shoddy credit checks in place which meant huge default rates on the loans. Read The truth behind Quakle's collapse.

Agree It doesn’t even have credit checks, so default rates (or, in plain English, people not paying the money back on time) will likely be at least as high as those seen at Quakle. People are more likely to lend money based on emotion, not fully evaluating their chances of getting the money back. And that’s a recipe for disaster.

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Payday loans

One of the main reasons people requested loans through Quakle was the desire to be free of payday loan debt. I’ve no doubt that would also be the case for many people using Agree It.

And you’d imagine that the loans arranged with friends and family would come with far more palatable interest rates than those charged by Wonga and the rest, so on that front it’s difficult to argue with what Fansa is trying to do. There are plenty of much cheaper alternatives to payday loans, of which borrowing from friends and family is just one. Read The best alternatives to payday loans for some other suggestions.

But to my mind there’s no reason to arrange a loan with your loved ones in such a public way.

What do you think? Is Agree It an appealing way to arrange a loan between family and friends? Let us know your thoughts in the Comments box below.

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The best alternatives to payday loans