In the United States today as well as other countries a phenomenon is growing which is called person to person loans or peer to peer lending.
Companies like Prosper.com and Facebook Loans Club provide a platform matching individuals looking to borrow
money with individuals looking to lend money.
Person to person lending is a new phenomenon
For borrowers person to person loans an alternative option to finding a loan compared to traditional routes such as going to a prime lender for an unsecured loan or a subprime lender for a payday loan, your choice of lender being dictated of course by your credit score.
For lenders the peer to peer loans platform provides individual people and
not companies the chance to lend money as a form of investment, where they will get a better rate of return compared to perhaps a money market account or a stock dividend.
There are different levels of risk profile. Borrowers perceived to be a higher credit risk will borrow at a higher rate of interest. Borrowers seen as highly likely to repay a loan will be able to borrow at a lower rate of interest.
It is a very clever idea and companies such as prosper.com offer an excellent, user friendly platform whether you are looking to either get a loan or offer a loan.
As the government’s rescue plan slowly unlocks the credit market, you could consider peer to peer loans as a way to get emergency funding. AP Personal Finance Editor Trevor Delaney is in conversation:
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