This App Can Help You Loan Money to Family and Friends. But Should You?

This may be the best way to lend money to friends and family.

The COVID-19 pandemic has caused a lot of financial hardship, now coupled with high inflation and unaffordable housing costs. This has led to an uptick in the number of people turning to family and friends for help. To address this issue, Pigeon recently debuted a new personal loan app that allows you to lend money directly to your family and friends. It also sends payment reminders and tracks payments.

How does it work?

The Pigeon app is designed to make borrowing money from family and friends simpler and more transparent. Here's how it works: First, you create an account, then you add the names of any family or friends who you want to be able to borrow from or lend money to. You can also set up multiple loans if needed.

Once you've added all the relevant information, you can start requesting or offering loans between yourself and the other parties involved. You can set up the terms of the loan agreement or import a loan you already have. The app will automatically calculate interest rates based on how much you are borrowing or lending, so everyone knows exactly how much they need to pay back or receive.

The app includes payment reminders so no one forgets when their payments are due. You can generate a legally binding contact and lend up to $500,000, all using the app. Pigeon has financial education for both the lender and borrower, and you can even earn rewards just by using the app that can be exchanged for Amazon gift cards.

How does Pigeon make money?

The app is free for both lenders and borrowers. There are no fees or penalties like a bank or credit card company would charge. While it is free to use, there are some charges to note. There is a 2.5% fee on any payments made internationally, and for faster processing, Pigeon recommends that you use its one-time payment feature. Pigeon takes a 3% fee from any debit or credit card transaction that goes directly to its payment processor, Stripe.

Is it safe?

Pigeon uses bank-level encryption technology to ensure all data transmitted through its servers is protected against cyber threats, like hacking attempts and identity theft. Pigeon uses Amazon Web Services for cloud storage and Stripe, the world's largest online payment platform.

Should you use it?

In short, while the Pigeon app makes loaning money easy and secure to other people, as a platform, Pigeon does not itself lend money. It could take out the awkwardness of loaning money to friends and family. The app is free to use, offers rewards, and handles the paperwork and legalities. The loans can be customized in any way.

It's important to remember that there are still risks associated with loaning money -- even if those risks are minimized by using an app like Pigeon -- and these risks should always be taken into consideration before entering into any loan agreement with family or friends. That being said, for those looking for a secure way to loan money directly between themselves and their loved ones, the Pigeon personal loan app may be worth checking out.