Peer Lending Websites and How They Work

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Posted on 06/29/2010

If you need a loan or you’re interested in investing, peer-to-peer lending may be a good fit. Peer lending, also called social lending, is an online marketplace for borrowing and lending money that cuts out the need for big banks. For borrowers, it’s a great way to get smaller sized loans at lower interest rates. For lenders, peer lending can provide greater returns while helping someone in need. Statistics show that the peer-to-peer lending industry is expected to hit $5.8 billion in loans this year which shows it’s a popular option for consumers. Here are a few of the social lending websites in the marketplace.


Lending Club: According to reports, Lending Club facilitated more than $10 million worth of new loans just during the month of May. Since its start in 2007, Lending Club says its investors have experienced an average rate of return of 9.64 percent. On average, interest rates for borrowers are at 13.26 percent. Borrowers can take out loans up to $25,000.


Prosper: Smaller than Lending Club, but still a popular choice is Prosper, which handed out more than $2 million in loans in May according to reports. Statistics on the site say that $198 million in personal loans have been funded by hundreds of thousands of Prosper members.


Loanio: Similar to Prosper, Loanio offers a way to fund and receive loans. However, the site is currently not accepting any new registration from lenders or borrowers because they’re taking care of some important business with securities authorities.


Kiva: If you’re more interested in using your money to help others by providing microloans check out Kiva.org. Kiva has coordinated more than $143 million in loans between lenders and entrepreneurs around the world. Lenders can give as little as $25 to projects they want to support and the money is paid back over time. While lenders won’t make money out of the deal they can still feel good knowing they’re investing in others.


LendFriend.me: If you’ve ever borrowed or loaned money to a friend or family member you know it can create a sticky situation. LendFriend.me is a free site that helps make the process easier for friends and family members by drafting loan terms and creating a repayment schedule.


By Alison Storm


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