P2P Lending

I first found out about P2P (peer-to-peer, people-to-people) lending through Facebook. Several weeks ago, I added the Lending Club to my app list. And it looks like a great idea. Loans is a major way banks make their money. And so here is a chance for the average person to operate like a bank.

At Lending Club, lenders can earn from 7.75% to 17.22%, depending on the risk (though the highest so far is 12.49%). One major limitation right now is that all their loans are for 36 months. So, you’re locked in for 3 years (unless the borrower prepays the entire amount). I’d rather lend for just 12 months instead of 36. One thing I do like is that you can spread your money across a bunch of loans. So, if one of them defaults, then you’re not out too much.

I also joined Prosper. And they have more features than Lending Club. And instead of having predetermined rates, lenders bid for loans. They also have borrower groups where the groups hold a borrower member more accountable. If the borrower does not pay, the group gets a bad rating.

Links:
Prosper
Lending Club – for Facebook members
Zopa – only available in the UK
CommunityLend – only available in Canada
Kiva – loans to developing nations