College students may have another way of raising funds to pay for their room, board, books and other necessities for the upcoming school year. Social networking has now extended itself into the lending business.

The concept was launched last week by GreenNote, Inc. The company describes itself as “an innovative new company that has been created to help students obtain loans for education via social networking rather than through traditional lending methods.” Basically, GreenNote facilitates lending relationships and funds between students and lenders, for a fee of course.

Money mom decided to poke around on the company’s website. This seemingly simple concept is not as simple as you might think.

Here’s what she found:

Students must raise at least $1,000 during a “pledge drive;”
Lenders must loan at least $100;
Lenders have no guaranteed rate of return and only GreenNote can go after the borrowers for the money;
One of the ways lenders may loan money by credit card (this seems rather risky);
GreenNote charges service fees for each pledge drive, either $49 or 2% (whichever is greater);
GreenNote also charges a servicing fee of 1/12% the outstanding principle to the lender at the beginning of each month when a loan is in repayment;
The standard agreement issued by GreenNote may or may not be valid, depending on the where they’re being used. (you may need to consult an expert on your own)

Students should make sure that they maintain their credit histories no matter what type of lending they seek or obtain. We have some tips for students and parents on how to leave school with less debt and good credit for your futures after college.