Peer to peer lending is done online and you will not find it in banks, and other brick and mortar lending institutions. It is a platform where the borrower borrows from the investor. Although initially the investors consisted of mainly individuals, today, institutions are now dipping their hands in the business. The lending business works by meeting the investor and the borrower in one platform. If you need money for your use such as home improvement, repair your car or refinance your credit card loan, you log on to the website like Prosper or Lending Club and fill in the application form.
If the approval succeeds, the money is deposited in your account within a few days. It will depend on the customer risk profile to determine the interest rate. Most of the rates range between 6 to 10 percent but for the high risk borrower, they may be as high as 35 percent. If you are seeking for a way you can make return on your investment, you can join the community and put in your money.
The companies are always on the lookout of investors to expand their resource base. As the popularity of these peer to peer lending increases, it is expected that more investors will join the platform. With as little as $25, you can be part of the funding team of the customers’ loans thus gaining a share of this rapidly growing lending business. According to Mitchel Harad, who is the Lending Club’s vice president of marketing and advertising, these loan facilities are not easy and don’t just go to anyone.
Since these are unsecured loans, the lending has strict regulations that help minimize the risks involved in lending. Consumers can get unsecured loans of up to $35,000 and this clientele group consists mainly of the good to excellent credit only. One thing with the p2p lending is that it may not be helpful for the bad credit consumer. However, the lending can be used to refinance credit card debts.
Close to 70 percent of Lending Club’s customers use the loans to pay off their high interest credit card debts. The interest and payments to investors at Lending Club is done on pro rata basis and the company takes one percent fee. In a period of 3 years, Lending Club has surpassed the $ billion mark in loans issued and the prospects for growth are high. There is also the possibility that the company is set for an IPO listing.
In a similar trend, as of October 2012, Prosper, another player in the p2p lending was sitting at $425 million loan originations since its inception and $15 million in loans originations in the month of October. If you need a loan to remodel your home, repair your car, refinance your high interest rate credit card balance, then the peer to peer loans may be a good option.
In the same way, if you want to invest and gain some good returns from your dollars, you can pull your resources together at Prosper and Lending Club p2p lending companies. As the consumers and investors gain confidence, the market is expected to even growth further.
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