Peer to Peer Lending Websites

Whether you are a borrower who needs some cash or an investor who wants to earn a good rate of return, peer-to-peer lending is a great way to meet your needs. Through this innovative means of personal finance, borrowers visit third party websites and submit loan requests to communities made up of thousands of potential lenders. In turn, lenders decide which loans to fund. Borrowers who have poor credit or no credit are able to get financing from this method when others have turned them down, and lenders have a real chance of earning a great return on the loans they fund.

There are many different peer-to-peer lending websites where borrowers and lenders can engage in the borrowing and lending process. Here are a few of the major sites and a brief explanation of their features and advantages:

Prosper.com — Prosper.com is one of the oldest, largest and most respected peer-to-peer lending sites online. Over 1.2 million people have joined the site, and the total amount of money that has been borrowed through Prosper.com is approaching $300 million. Prosper.com rates loans on a scale from AA (the lowest risk loans) to HR (the highest risk loans). Borrowers can select terms of up to five years, and they can borrow up to $25,000 through the site. Lenders can choose to fund individual loans, or they can buy notes that represent loans, much as investors on the stock market buy shares of mutual funds. Currently, Prosper.com is the most widely accessible peer-to-peer lending site. Only Iowa, Maine and North Dakota do not allow residents to use the services that the site offers.

LendingClub.com — LendingClub.com is another large peer-to-peer lending site. Since 2007, the site has facilitated nearly $500 million in loans, and investors have received over $40 million in interest payments. The vast majority of borrowers who use this site borrow money to consolidate debt and pay off their credit cards, and the site has a rating system to help lenders understand the risk of investing in each loan. Those who are interested in saving for retirement are likely to be interested in LendingClub.com, as investors can open a no-fee IRA with the site that allows them to invest in notes that represent LendingClub.com loans. Investors also have the option of funding individual loans. Borrowers with excellent credit can get a personal loan with an interest rate that is less than 7 percent, which is far lower than most standard bank loans.

FundingCircle.com — FundingCircle.com is one of the newest websites that connects borrowers and lenders for peer-to-peer lending. This site is based in the United Kingdom, and it focuses on business lending. Lenders have the option of buying parts of loans from other lenders, or they can choose to make loans to individual business borrowers. Thus far, lenders have earned an average gross yield on their money of over 8 percent. Borrowers can repay their loans in their entirety at any time before the end of the loan term without a penalty.

PeerForm.com — Borrowers may be especially interested in PeerForm.com because they can get some of the lowest interest rates in the peer-to-peer lending industry. Low-risk borrowers can take out a loan with an interest rate as low as 4.5 percent, and high-risk borrowers will never pay more than 27 percent a year on their loans. Investors who are interested in funding peer-to-peer loans have the opportunity to ask questions of potential borrowers during the loan application process, but not every person can invest through PeerForm.com. All interested investors must fill out an application, and only those whom PeerForm.com deems accredited investors will be allowed to join the community of lenders.

Kiva.org — While Kiva.org is more a microfinance site, its awesomeness got it onto our list. Kiva.org is a unique site in that lenders do not earn a return on their loans. Instead, the site helps meet the needs of the working poor around the world who do not have access to loans. Essentially, this site allows individuals to donate to others and receive their money back without a return. Those who are interested in increasing their charitable contributions will want to visit this site.

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