LETS Lending is a dangerous addition to any LETS community and I generally recommend against offering a lending service within your community. There are both legal and social reasons not to allow money lending within your community.
Lending tend to be very strictly regulated in many countries. It can be very hard and time consuming to get the necessary licenses to be allowed to lend money to your members. The benefits you get from being able to offer the service is usually rather small.
Money lending can easily become a point of contention between different members of the community. The desire to be able to help people in the community by lending them money is honorable but it usually creates more problems than it resolves. Offering money lending within a LETS community can very easily tear the community apart from the inside out and destroy everything you want to build.
There is always a risk of people abusing the system when you offer them to lend money. They might borrow money that they never intend to pay back. In these cases it can be very hard to get the money back. Borrowers might also be forced to prioritize commercial lenders over your loan and might hence not be able to pay back the money even if they want to.
I strongly recommend against offering a money lending service as a part of any LETS community.
This is not to say that you cant offer a small credit within the trading system that the members can use to trade service within the community. What I recommend against is to offer loans in real money that can be used in the real world.
What to do instead
A good alternative to a lending service is to regularly help negotiate loans for the members who want them. By bundling several applications at the same time you become a more valuable customer for the bank or loan institute. This allows you to negotiate better terms than any single individual would be able to get on their own.
It is very important that each members loan is kept as a separate loan even if they are negotiated at the same time. Never do any kind of deal that creates a shared responsibility for the total debt. That can be very damaging for the community and the members who end up paying the loans of the members who are unable to pay.
I recommend that you contact one of the following companies if you want help negotiating a loan: