Peer-to-peer lending.

Have you ever heard of crowd-funding also known as peer-to-peer lending?  A few years ago businesses started up that provided a place for people with extra money to lend it to people who needed money.

Per Wikipedia crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet.

For lenders with as little as a few hundred dollars to lend these systems provided an excellent alternative to the low interest banks are currently paying.  For instance I’ve had several hundred dollars working for me at prosper.com since 2009 and have earned around 5% interest on the loans I have made.

The really good thing about this kind of lending is that you can split up your money so that only a little is loaned to any one lender.  This controls your risk.  You can even automate the reinvestment of funds as the borrowers make their payments.  How cool is that?

The only drawback to the lender I can think of is that your money is not very liquid so don’t invest every dime you have, just what you can afford to keep working for you.

For borrowers, crowd-funding or peer-to-peer lending is an attractive option.  For example, self-employed individuals often have issues securing financing from a bank or sometimes people with less than perfect credit need money.  It is also a good option to obtain an unsecured loan.

When individuals have property to put up as collateral for a loan then the loan is said to be secured.  When there is no collateral that is referred to as an unsecured loan.  Unsecured loans almost always have higher interest rates than secured loans.

I have been a lender and a borrower using peer-to-peer lending.

Want to give it a try?

If you’d like to apply for a loan click here.

If you’d like to put some of your money to work lending click here.

 

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