Tuesday, February 22, 2011

Top Five Peer-to-Peer Lenders

One new and growing source of microloans (those under $35,000 to $50,000) are peer-to-peer lending networks. Peer-to-peer lending, also sometimes called social lending, providers make direct loans (no 3rd party intermediary like at a bank) between consumers and investors possible. Put in other words, these entities connect those who have money to invest with those who need money. These official networks and companies did not even exist ten years ago. Social lending is just another example of how people and companies continue to engineer creative legitimate solutions for business financing.

Prosper.com (www.prosper.com) - Prosper is the industry juggernaut and lends to individuals and small businesses that typically have credit scores between 620 - 699. This company was founded five years ago (February 2006) and essentially hailed the advent of peer-to-peer lending. To date it has funded ~$219 million in loans. Prosper, as of December 2010, now sets the interest rates for loans. Previously potential investors bid on the rates. Available in most, but not all, states. Check website for details.

Lending Club (www.lendingclub.com) - Lending Club is the 2nd largest peer-to-peer lending site by volume in the U.S., behind Prosper, but the largest in terms of loans funded. It was founded ~three years ago. Lending Club sets the interest rate for all the loans and has done so since inception. Its tag line is "Investors earn better returns, borrowers pay lower rates." As of today, 2/22/11, Lending Club has funded ~$226 million in loans.

Loanio, (www.loanio.com) - Loanio is a little different. From Loanio's website,"all loans are originated by Loanio and then sold to website lenders who are legally considered the loan purchasers". So, essentially, Loanio originates and makes the loan, then sells the loan to the small individual investors through its website. Loanio is currently in a quiet period so it's not making loans or taking on new investors at this time. It will "re-open" for business as usual soon.

WikiLoan
(www.wikiloan.com) - WikiLoan provides tools, documentation, and other support that enable friends and family to make loans to or obtain loans from one another. Borrowers can also access loans from the WikiLoan community. Loans range in size from $500 to $25,000.

LendingKarma
(www.lendingkarma.com) - LendingKarma is different. It does NOT provide loans to or from strangers. It strictly facilitates loans between family and friends. Need a loan and your brother or accountant offers to give it to you? LendingKarma will help clarify loan terms, set up a repayment schedule, and track loan repayment.

A note: Some early entrants such as Zopa, Virgin Money, and Fynanz no longer operate in this market although they still exist as companies. Zopa and Virgin Money still lend in the U.K. and other countries but NOT in the US. Fynanz now only provides student loan assistance through credit unions and similar entities.


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