3 Social Lending Networks
More and more people are looking to borrow money in order to launch startups businesses and develop new products and services. Fortunately for them, an increasing number of entrepreneurs out there out there looking to invest in projects they think could make a splash. These groups are now looking to online social lending networks in order to cut out the middleman (in this case, banks) and optimize the money being put forth. Because of these lending networks, it is more likely you will be able to launch a business, make sound investment, and calculate your target retirement amount amount based on a structured loans. Here are the top three social lending networks:
Lending Club—A peer to peer lending network that connects borrowers and lenders through social media. Borrowers put forth an initial fee of anywhere between 2.25 percent and 4.75 percent in order to create a listing that describes the type of loan they are looking for. On the other end, lenders can peruse through the different loan requests until they find one that sounds interesting to them. If they decide to lend money they will pay 1% of the borrower’s origination fee.
Pro: Provided you have a good credit score, the Lending Club offers better interest rates than banks.
Con: LC is highly selective and rejects 90% of borrowers who apply for loans.
Prosper.com—Lending Club’s biggest rival began like the mixture of eBay and an auction service but has since transformed into a more Lending Club-like business model. For lenders, Prosper.com currently offers seasoned returns of 10.46% and the ability to diversify their portfolio. For borrowers, Prosper starts their rates at 6.59% APR for unsecured loans. They also offer fixed loan rates ranging up to 35.84%.
Pro: Lower origination fees and the ability to make monthly payments
Con: Borrowers may not have as good of credit.
Zopa.com—Zopa is the leading UK-based lending network, although they are currently developing operations within Italy and Japan and has partnered with six US credit unions. The word stands for “zone of possible agreement.” The service itself is very similar to Lending Club and Prosper.com, with the principle difference being that it is more structured like an online auction.
Pro: Better interest for borrowers, better returns for lenders
Con: Has not expanded to the US yet.
These three peer-to-peer social lending networks are symbolic of the larger trend toward social media and crowd-funding, both of which are challenging banks. The trend appears to not have left entrepreneurs by the wayside. If you’re looking to borrow money or invest money and are somewhat suspicious of banks you should take a long hard look at networks like the Lending Club, Prosper.com and Zopa.com.
