There is a new and emerging source of micro loans, meaning loans from $2,000 to $35,000 in the form of peer to peer lending. Also known as social lending, p2p lending provides a common platform for lenders and borrowers without involving any third party like a bank. Banks pay low rate of interest to those saving money and lends these savings of others to borrowers at very high rates of interest and thus make profit. This system of peer to peer lending is rather new as it wasn’t there till about a decade ago. Nevertheless, it’s a classic example of how people with surplus funds can assist those needing money, while benefiting both the parties involved. For those that are interested in online p2p lending, here is a list of the most known peer-to-peer lending sites:
Prosper.com – is the largest peer to peer website in the US. It is ran by Prosper Marketplace Inc. and provides unsecured loans up to $25,000 to individuals and small businesses having credit score above 620. This company formed in February 2006 and is renowned for having introduced the concept that has provided loans to the tune of $262 millions till autumn of 2011. Though initially the investors offered bids on rates, now Prosper decides the rates for loans. The company operates in almost all the states. Current borrowing rates at Prosper.com start from 6.59% APR and ROI for investors starts at 10.59%.
Loans are offered on one, three or five years.
Lending Club – is the second largest peer to peer lending site in the US. The maximum amount offered is $35,000 and current rates for borrowing start at 6.78%. Lending Club continues to be the largest as far as the amount of disbursed loans is concerned. Founded in 2008, Lending Club, since its inception has been setting the rate of interest for all loans. The company’s watchword is “Investors earn better returns, borrowers pay lower rates.” Lending Club had funded about $226 million in loans as of February 2011.
WikiLoan – offers documentation, tools, and other support that one may require while taking loan from or lending money to friends and family or for getting loans from one another. Borrowers can also approach it for loans from the WikiLoan community (read from strangers) but on a very limited scale, compared to the three entities already mentioned. The size of loans varies from $500 to $25,000.
LendingKarma – Though LendingKarma is unlike any of the previous four loan providers, it has many similarities with WikiLoan. LendingKarma does not offer loans to or from strangers. The company only facilitates loans among family and friends. If you need finance for expansion of your business and some member of your family or an accountant friend is willing to offer you the needed funds in the form of loan, you can seek help from LendingKarma. LendingKarma will help explaining loan terms, lay down schedule for repayment, and track the same.
Zopa, Fynanz and Virgin Money, some of the early social lending sites are no more operating in the US, though the companies are still there. Of these, Zopa and Virgin Money still continue their lending operations in the United Kingdom (U.K.) and other countries but not in the US. Fynanz totally redesigned its business. At present it offers student loan assistance via credit unions and similar organizations.