Peer to peer lending is a revolutionary form of lending that benefits parties, the lender and borrower significantly. The humane, structured form of lending which takes the help of social media online, has found a lot of takers. In this form of lending, the borrower has to go to one of the most well-known peer to peer lending sites, register an account and make a loan request with a reason for the same.
The peer to peer lending site then matches the borrower’s demand with that of the rightful investor (lender) and a deal is digitally signed. For the borrower, this is a good opportunity because he can leverage the situation to his advantage. He or she can talk to many lenders and choose the one with the lowest rate of interest.
For the lender who gives the money, he has the chance to earn high returns than what he would get in a conventional market. Of course, there is an element of risk but overall, most successful peer to peer lending sites have reported high satisfaction and better interest rates for investors than what they would get in the usual CD or savings accounts. The investor can also exercise control by checking the borrower’s credit score, stability of income and other information before providing the loan. Also in this form of pooled lending, you are contributing your money to a pool of borrowers. This means the risk is also diversified and it is not that everyone will default.
Above all, most lenders report satisfaction on helping people because you get to hear the other person’s story and challenge. In a cash advance or such other of lending scenario, things are impersonal. You just go by the facts and figures which may put the borrower at disadvantage especially when there is a justification to offer the money to the borrower on a compassionate ground. Borrowers have to submit their credit score, debt to income ratio and provide a good description of why they want financial support.
Some of the best peer to peer lending sites that are quite popular include Lending Club, Zopa, Prosper and Kiva. If you want more control over your money as an investor, you should go for direct lending. For instance in Prosper, you can go through the profiles of borrowers and find out to whom you want to lend the money to. There are some peer to peer lending sites that are not profit oriented but are more tuned to giving social service. KIva focuses on providing money to third world countries, the needy and impoverished women; the site considers peer to peer lending as charity.
There are some peer to peer lending companies that specialize in giving bigger loans for things like mortgage. One of them is Virgin Money. There is another site of this kind which equips family members with students’ loans like Green Note. It has been seen that people who mostly come for peer to peer lending are the one who are in dire need of cash and have been rejected by other lending institutions. The lenders by means of diversifying the money to be loaned, do not have to be insecure about their money. For instance, instead of giving $1000 to one person, the same money can be given as $100 each to ten different people.