If you are thinking about learning more about peer to peer loans visit Kyle’s website. There you will find excellent information about peer to peer lending
Social lending or peer to peer lending begins with the idea that people are willing to lend other people money. If you have not heard of it before you are not alone, but it is a growing trend. The most basic definitions are individual investors loan money to individual borrowers. Revolutionary idea right? Well, actually it isn’t and here is why.
Banks have been doing this for hundreds of years. They take depositors money and make loans and mortgages with it. They pay a low interest rate to the depositor of the money and collect a higher interest rate from the borrower. So in a way people have been lending to people indirectly for a long time.
Peer to peer lending is what happens when there is less bank involvement. The bank in some sense becomes a financial intermediary that connects lenders to borrowers. The transaction are underwritten and facilitated by this intermediary but in exchange for less involvement they ask for a small return. Often this takes the form of fees for doing the loan and a small piece of the interest rate charged to the borrower. Since the money is coming directly from individual, the risk in some ways transferred directly to the individual lenders. Moreover, since there is a transfer in risk, the return must be higher for the individual lender.
Now, are you already thinking that this is for you or no way? Well, you might already come to the conclusion that if you are a saver, you want no part. This is understandable and there are very specific reasons as to why. First, why are you putting you money in the bank anyway? The answer more than likely is that is safe. The banks do not expose you to any of the risk on the loans they give. In return you get a low interest rate. Second, the money you have is liquid. You can get it at any time and regardless of the bank lent your money previously they must honor your withdrawal. If you lend your money in peer to peer lending, your loan pays over time and it is impossible to truly get your money out without selling your right to the loan.
We have only talked about risk, but there are the returns. If you this has sparked your interest, you could be an investor. The returns listed by lending club.com are anywhere from 6.69% to 19.37%. This is a far improvement over what banks are paying in savings accounts. Furthermore, every loan is underwritten by the financial intermediary, checking borrower’s income, credit statement, credit rating and background. They handle as a normal loan by a bank and borrowers that don’t meet quality standards are declined. The default rate listed also by lending club is 2% in last 120 days. Lastly, there is potential of diversification with peer to peer loans. You don’t have to fund just one loan but several. This spreads you money out between several different loans and loan grades further hedging your ability to avoid default by borrowers.
Now, savers are not investors and vice-versa. It depends on what you are actually looking to do with your money. You always need to weigh your options or seek professional advice, but peer to peer lending could provide one way for a saver to become an investor.
- Related Videos
- Related Articles
- Ask / Related Q&A
- Making a Profit on Investment From Social Lending Sites
- P2p Lending is the New Age Solution to Borrowing
- Can’t Get a Business Loan?
- Peer to Peer Lending: are You a Saver or Investor?
- Business Loans Sources: Sometimes You Have to be a Little Creative in Finding the Money
- The Role of Scholarship, Grant, And Loans to College Financial Aid
- Seven Alternative Sources of Capital for Setting Up a Business
- What is a Payday Loan?




Japanese Candle Charting Opens Doors of Understanding
By: William Kurtz | 10/07/2009The "bar chart" method of financial price display is fine as far as it goes, but it has been superseded by the Japanese Candlestick method, which uses the Candlesticks as the base. It then goes on further so as to display the area between the opening price and the closing price as a cylinder, left white if the close is higher than the open and filled in black if the close is less than the open. Simple, but highly effective and revealing.
You Can Now Make Good Stock Investments - Penny Stock Fortunes
By: Bryan Burbank | 10/07/2009Penny stocks are a great way that you can make money in the stock market but it is important that you learn how they work. There are many advantages to investing your money in the stock market because over the long haul it has been proven that you will come out ahead. The benefits to investing in penny stocks are that you will be able to maximize profits because the cost of each share is so low. You will be able to purchase a large amount of penny stocks for a small price, so when the price pe
You Can Easily Get Rich Trading Penny Stocks
By: Bryan Burbank | 10/07/2009Many people are looking for ways to invest their money and now because the housing market is bad, many people are finding that penny stocks can be good for them. The best part about investing in penny stocks is that you can make a lot of money with a small investment. You have a lot of leverage because you are able to buy a large amount of shares with a small amount of money. What this does for you is when the price per share goes up a small amount you make a great profit. It is important tha
How to Have a Penny Stock Fortune - Tips to Make Money Investing in Penny Stocks
By: Bryan Burbank | 10/07/2009If you are looking for a great investment in you may want to consider buying and selling penny stocks. There are many advantages to trading in these types of securities because you get a lot bang for your buck. Sometimes it is difficult to be positive when we see the stock market at such low levels. You must realize that over time the stock market is one of the best things to invest your money in. One way that you can maximize your profits is to use a penny stocks because they allow you to buy m
Beware of 'bonus rates on saving accounts'
By: Sam Gooch | 10/07/2009Those Britons on the search for a new savings account are being advised to do so with care, it has been revealed. Careful consideration should be taken when selecting a savings account, it has been suggested.
You Can Now Profit With Trading Penny Stocks
By: Bryan Burbank | 10/07/2009If you are looking to make money now than you need to take advantage of penny stock day traders. There are so many great advantages to investing in the stock market and even during bad economic times you can profit. The most important thing that you do is get the best advice when investing in penny stocks. There are many publications that specialize in buying and selling these types of investments and this can benefit you because to make money you need to have the knowledge. If you have look at
Learn How to Find the Best Penny Stock Investments
By: Bryan Burbank | 09/07/2009Many people like to invest in the stock market so that they can build a nest egg for the future. If you are a more risky type person then you may want to look into buying and selling Penny stocks. Many people have made a fortune with these type of stocks because you can purchase a large amount for a small price and the advantage is if the stock goes up just a small amount, because you have so many shares. You make a great profit. It is always best to get as much advice as possible when buying
Find the Best Penny Stocks - Invest in the Right Penny Stocks to Make Money
By: Bryan Burbank | 09/07/2009When looking for great stocks to invest in you want to consider the opportunities that are available in penny stocks. If investing in penny stocks you need to make sure that you understand how these type of investments work before you jump in. There is a lot of money to be made when you buy inexpensive stocks and the advantage is that you can own a lot of shares for a small amount of money. You make money because the stock rises just a fraction and with having so many shares, your investment p
Peer to Peer Lending – are You Looking to Start a Business
By: Kyle Gentile | 31/01/2009 | EntrepreneurshipDo you need funding to start a business? You could use peer to peer lending. Find out the pros and cons of peer to peer loans for small businesses.
Credit Score – Should You Close Old Accounts
By: Kyle Gentile | 31/01/2009 | CreditWhat happens if you close an account? Will it affect your credit score? Find two areas that it could effect and why might want to reconsider.
Peer to Peer Lending - How Interest Rates are Set by Lending Club
By: Kyle Gentile | 21/01/2009 | InvestingHow interest calculated for peer to peer loans? Lending Club uses a formula that begins with the assigning of a loan grade. Find out more on how they do it.
Trade in Peer to Peer Loans With Lending Club
By: Kyle Gentile | 15/01/2009 | InvestingLending Club has just added some liquidity to peer to peer loans. Find out how and why they did it.
Peer to Peer Loans as Debt Consolidation
By: Kyle Gentile | 10/01/2009 | Debt ConsolidationDebt consolidation is often done by using a second mortgage or single credit card. Peer to peer lending is another option and comparing it to the others has many benefits.
Peer to Peer Lending: an Emerging Industry
By: Kyle Gentile | 08/01/2009 | LoansNever heard of peer to peer lending? It is growing at a rapid rate for several reasons. Find out what they are.
Peer to Peer Lending: Discretionary Investing
By: Kyle Gentile | 05/01/2009 | LoansThere is risk in every investment. Find out what the risks of peer to peer lending are. Also, what is done to limit and reduce the overall risk. And even with this risk, people are finding this to be an attractive investment.
Peer to Peer Lending: are You a Saver or Investor?
By: Kyle Gentile | 02/01/2009 | InvestingWhat is peer to peer lending? Find out more what it is and if you are the type of person looking to invest.