You’ve probably heard about peer-to-peer lending before since it is starting to gain in popularity, but it’s still relatively new. Right now, the two major players are Lending Club and Prosper. Right now, Prosper isn’t taking on any new lenders or borrowers while it goes through its quiet period. Lending Club went through the same thing recently, but has since reopened and has gone through all the procedures for registering securities.
Just to get you up to speed if you’re unfamiliar with peer-to-peer lending, it’s actually a pretty simple concept. It really just means individuals borrow and lend from each other, and the likes of Lending Club and Prosper have created the technology and online marketplace to match borrowers and lenders. This type of borrowing and lending has a few advantages over traditional methods. First, it provides a means for individuals to seek money when they may not otherwise be able to get the funding through a traditional channel. This has become increasingly important as credit is even harder to get. And for lenders, it gives people a chance to reach out and help those who are seeking money, investing as little as $25.
Never before could someone in New Jersey find and help someone in California who’s looking to borrow money to start their own business or buy books for college. And when it comes to the bottom line, it can be beneficial to both parties. In many cases, these peer-to-peer loans may carry interest rates lower than what they could get with a credit card or bank loan, and lenders can earn a little more interest on their money than what a savings account or CD at the bank might offer.
But that’s just my quick and dirty explanation. Lending Club has actually put together a quick video that highlights some of the benefits, and if you’ve been on Facebook at all, you’ve probably even seen some of their ads.
More on Lending Club Coming Soon
I’ve been slowly getting my feet wet with peer-to-peer lending myself and started up with Lending Club a few months ago. I’ve been documenting my experience and impressions with the platform and will be doing a more complete review in a few weeks. But I have to admit that it’s been fantastic thus far. So, if you’re looking for more information, stay tuned.
In the meantime, I thought this would be an opportunity to see how many of you are already using Lending Club or Prosper, or have in the past. Like I mentioned above, while the peer-to-peer lending sites are still somewhat new, they have been around for over a year and I’m a bit of a late adopter. I know there are a number of people who have been using them from the start and have had quite a bit of success. So, what about you?
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.