With banks no longer able to extend the kind of credit that ultimately got them in trouble in the first place, people are suddenly looking for a lending alternative that won’t involve tracking down a member of the Gambino crime family. Fortunately, they haven’t had to look too far to find a potential financial lifeline.

Peer-to-peer lending has filled some of the credit vacuum left by established financial institutions in the midst of the current economic crisis. Both local and online brokers have managed to eliminate the middle-man by offering smaller loans at larger rates of interest, generally reported to be between 9-12%. A recent story in the Seattle Times profiled Scott Langmack, an independent lender who has used LendingClub.com to lend more than $600,000 through roughly 1,400 unsecured loans, only two of which he claims have been defaulted on. It’s players like Lanmack who have directly contributed to a new peer-to-peer lending industry that analysts say could grow to more than $100 billion in annual loans by 2012, up from about $500 million this year.

With banks increasingly on the periphery and borrowers looking for smaller, stop-gap lending solutions, a number of online players have risen to the fore in the United States. Another popular site, Prosper Marketplace, uses an auction-style p-to-p format, although the Securities and Exchange Commission has been keeping a watchful eye on these sites. In November, Prosper received a cease-and-desist letter from the SEC, saying that the lender had violated the Securities Act. This month, Prosper ended its nine-month hiatus by settling with the SEC and reopening its lending business in a number of states.

An interesting extension of social networking, the micro-lending trend could prove to have a greater influence in the third world, where there basically is no credit. This has been best-demonstrated by Kiva.org, the very first micro-lending web site which was extending credit to entrepreneurs in the third world long before the credit crunch hit in the west. With a number of westerners feeling the financial pinch, it looks like this could become a prominent global alternative without the use of a large bank. And all without the help of a loan shark named Sal.