Peer-To-Peer Lending: How the Process Works
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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. Peer-to-peer lending like Lending Club and Prosper.com are making a splash in the lending world by providing borrowers with simple, unsecured-loans at interest rates that are much more competitive than what is offered by most banks and credit unions. These companies offer one-year, three-year and five-year fixed-rate loans to borrowers with good credit at interest rates as low as 6%. The rates are so good that borrowers are refinancing out of their credit card debt and other personal loans into a peer-to-peer loan. How can Prosper and Lending Club provide loans at such competitive interest rates? The answer lies within where the money comes from-individual investors.When a bank loans money to a borrower, they do it with the money that's lent to them by a saver. A bank might provide a saver a 3% rate of return on a CD or a savings account and loan that money out at anywhere from 7% to 30% depending on the type of loan, pocketing the difference. The goal of peer-to-peer lending websites is to sidestep banks and allow savers to lend directly to borrowers without a middle man. As a result, borrowers get much better interest rates and savers have the opportunity t to get a better rate of return on their money.The process of applying for a peer-to-peer loan is relatively simple. Borrowers complete a simple application process on Prosper or Lending Club's website. You will be informed what interest rate you can borrow money at immediately. If you like the loan offer, you can finalize your application and your loan listing will be made available to investors on the peer-to-peer lending marketplace. Investors will have up to two weeks to fund your loan. After the loan is fully funded, the funds for your loan will be transferred to your account. A month later, you'll make your first payment automatically. Lending Club and Prosper handle all of the paperwork and transactions to lenders, so the repayment process is incredibly easy.If you're a lender, the process to start investing in peer-to-peer loans has also never been easier. Unfortunately, there are a few states whose regulatory environments aren't compatible with investing in peer-to-peer loans, so make sure that you can be a lender before signing up. The account creation process takes all of 15 minutes. After getting your account setup, you simply transfer funds into your investor's account. A couple of days later, your funds are made available and you can begin investing in individual notes on the peer-to-peer lending marketplace you select. As the borrower makes payments, you will receive your share of the borrower's payment automatically and the funds will be transferred into your investors account. |
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Author Resource:-
Current User of Prosper.com - Saved My llife
Understanding Peer to Peer Lending and Why Many Are Choosing This Over Other Loan Options
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By :
Harris Patel
Submitted
2011-07-21 21:06:32 |
Article From Article Mayhem
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