Social lending - the formation of formal and informal networks of individuals to facilitate usually small loans - is on the rise. Is the practice a new threat to traditional banking? Could be.

Social lending. This site gives a primer on social lending, with an old CBS News video on the subject and brief descriptions of the various types of social lending and the websites that do it.

A similar page at MoneyRates also describes lending sites, including several for students raising money for college. One of these, GreenNote, says it helps students meet criteria for receiving charitable donations.

How to borrow. American Consumer News has this post that explains very briefly how to apply for a loan at the Lending Club or Prosper.com, the leading "peer-to-peer" lending sites. The sites differ slightly in how they work and how long you get to pay back a loan.

Prosper.com, which effectively shut down to new business from late 2008 to mid-2009 while it got into compliance with the Securities and Exchange Commission, now says it has facilitated $197 million in personal loans.

Lending Club says it has helped fund loans totaling $121 million.

Pros and cons. There's an upside and downside to most financial deals, and social lending is no exception. For example: You can borrow small amounts, and the interest charged may be lower than the bank's, but even social-lending sites can have strict requirements on borrowers' credit ratings. For investors, there's the chance that borrowers won't pay up. This posting at mint.com suggests ways to balance the advantages and the risks.

Future lending. A researcher at the Institute for the Future says peer-to-peer lending "is slowly chipping away at the monopoly that banks have enjoyed over the last century." After all, "Why go to the bank when you can get a loan at a lower interest rate through a p2p lending website."

Contact staff writer Reid Kanaley at 215-854-5114 or rkanaley@phillynews.com.