Is anybody using peer to peer lending services like Lendingclub.com or Prosper.com? I have seen them advertised a lot as a good alternative to going to a bank for a loan, since you'll probably end up paying a lower interest rate. I'm more interested in what the people funding the loans are making in interest, though. Lending Club is advertising an average return of 8-10%, which blows away any kind of savings account or loan and most index funds. Is anybody using either, or do you know of other similar companies? I'm interested and want to learn more.
I saw something similar on the news here today and it intrigued me. The interest rates were low, definitely lower than the average bank so I have no idea how the individual funders make money themselves. From what it was saying on the news, anyone who has anything less than perfect credit is unlikely to be approved for a peer-to-peer loan. This was a company in the UK, so I have no idea if the US companies run differently but it would seem there is little risk involved for those who are putting the money up.
I signed up at Prosper.com, but decided against applying for a loan. Your credit is a big factor, but it doesn't have to be perfect. I also decided to finance my own online ventures.
Sorry, I have been busy and forgot to check back on this. I was talking about investing in loans, not taking out loans. The interest rates are typically lower than a conventional bank lona, though, so there's that. I think the floor to qualify for a loan is higher, but there's still a decent sized window of opportunity for most people.
I have started looking into this recently and I'm thinking about doing it through Kiva. For me it isn't about the financial return, but about providing an opportunity to someone else. If my meager $25 can help a woman on the other side of the world start a business and feed her children it's worth the investment to me.
This is a new idea to me. I checked out the website quickly and it looks like something I will look into to get more information.
