With reduced consumer access to credit thanks to the credit freeze, how can you finance what you need? There is a valid, peer to peer option. LendingClub.com and similar on-line lending sites offer benefits for both borrowers and lenders. In a way, these sites are social networks. You get a loan based not only on your credit rating, but also your personal credit worthiness from the investor’s point of view. Borrowers request loans for home improvement, educational expenses, life needs, financing a move and more.
As a borrower at LendingClub, you first fill out an easy loan application. Your FICO score must be at least 660 to qualify, with no current delinquencies and overall good credit. The site will tell you your approved interest rate and you can post a loan request. This request will include the why behind the loan and your approved interest rate. Interest rates are competitive, ranging from 7.88% to 20.37%. The average loan amount is $10,000; however, loans range from $1000 to $25,000. Limits may vary at other peer to peer sites. Once a lender agrees to loan to you, the money will be transferred into your bank account and payments taken from your account automatically. All loans have a three year repayment period. You will post a loan request, including your reason for needing the loan. Lenders agree to make the loan, and your loan will typically be funded within two weeks. If your loan is only partially funded, you can choose to accept the funding or refuse it with no penalty.
Lenders can earn a substantial return on a peer to peer lending investment and have control of their own money. LendingClub.com charges a 1.00% fee, allowing lenders to earn between 6.88% and 19.37% on their money. Obviously, this return is much higher than a CD or other investment, and lower risk than the stock market in today’s economy. Careful credit checks performed by LendingClub allow you to feel safe loaning to others. Monthly payments are electronically transferred into your bank account each month. Not only can you make more via peer to peer lending, you can also feel good about helping others, choosing the requests that speak to you personally on the site.
In today’s economy, individuals are realizing that they need to rely on each other and not big corporations. Peer to peer lending is, in its own way, an old concept. Instead of investing your money in big business, you are investing in your neighbors. Whether you need to borrow or are looking for a new investment option, consider LendingClub.com or Prosper.com.