Lending Club Review – Peer to Peer Lending, a Solid Investment and Borrowing Alternative

After the stock market crashed at the end of 2008, many people, including younger generations became very skeptical of the stock market and what it had to offer as a legitimate place to park your money. Peer-to-peer lending is a concept that has been around for a very long time, but the method as to how it was carried out was not always efficient at all. It went a little something like this: Friend #1: Hey best friend, can I borrow $1,500 to get a new car? Friend #2: Do you promise to pay me back? Friend #1: Of course, you know that I’m good for it! Friend #2: Great, I’ll need that money by next week The truth is that these situations are very common. We enter into lending/borrowing agreements with friends and families all the time, and the lender enters into a situation with unlimited risk and no reward for their risk. This is where a website like Lending Club comes into play. Lending Club is a peer-to-peer lending network that brings investors and borrowers together to satisfy both parties needs by offering a secure, legal, and efficient service. Those people who wish to take more control of their investments can lend money to borrowers, and borrowers who are tired of having limited options for choosing a personal loan product can try Lending Club. How Lending Club Works For Investors – sign up as a Lending Club investor Deposit funds (via ACH, wire, check or PayPal). Easily build a portfolio of loans based on your criteria. Receive monthly payments of principal and interest. There are no maintenance fees. For Borrowers – sign up as a Lending Club borrower Get quick approval on a fixed-rate, 3-year loan from $1,000 to $25,000 Once approved, most loans fund in less than 2 weeks Pay interest and principal monthly automatically from your bank account Advantages of Lending Club Investors : If you’re looking for an alternative to the traditional stock market investments or you don’t have enough money to invest in real estate or don’t want to deal with it, Lending Club offers a real way to invest your money. Not only is it a solid alternative, but it allows you to take control of your money. You can choose a “guaranteed” interest rate based on your level of investing risk. Obviously, the higher interest rates will be paired with borrowers that are more of a risk to default on the loan, and vice versa. The interest rate is fixed though, whereas, some mutual funds that are based on risk levels do not actually perform the way they have in the past. Borrowers : For borrowers, the advantages are that you have a virtually unlimited pool of loans to choose from with hundreds of interest rate choices. You’ll never find something like this at a credit union or traditional bank. Plus, most traditional banks make it extremely hard to get a personal loan. You need absolutely spotless credit to qualify for most personal loans. Disadvantages of

Lending Club Investors : For investors, the disadvantage of Lending Club is the risk involved when lending to a peer. Just like any investment, the more money you want to make, the more risk is involved. If you want to lend to someone at a high interest rate, you’re going to attract a less than desirable borrower who could easily default on the loan, which means you lose your money. Sure, you can go after them for the money, but it’s an unsecured loan, so depending on how much the loan was, it might not be worth it when you pay court filing fees. Borrowers : For borrowers, the disadvantages are borrowing from the unknown and an unregulated institution. You don’t get the stability of borrowing from a financial institution, and despite what Lending Club boasts, you typically will find higher interest rates on the loans than a local credit union personal loan. Real World Application So as a borrower, what might prompt you to seek out a personal loan from a peer-to-peer network? One great example is when you are upside down on a car loan . Many people want to know how to get out of a car loan when they are upside down on it, and my advice to them is to sell the car for what it’s worth and take out a personal loan to fill the gap between how much they owe on the original car loan and what they sold the car for. Using Lending Club to serve this purpose is a great way to utilize the benefits it offers. Overall, peer-to-peer lending is an interesting concept with many benefits for both investors and borrowers.  Be sure to share your experiences in the comments below or sign up now if you haven’t already done so. Give Lending Club a try (free registration): Sign up as an investor – as a bonus, you’ll get $25 to invest free – just for signing up Sign up as a borrower As part of the Money Crashers 2010 New Year Giveaway Bash , if you sign up for Lending Club by January 31, 2010 (using one of the links above), we’ll give you an additional 50 entries for the contest to win over $7,900 in cash and amazing prizes. Simply forward your confirmation/welcome email from Lending Club to mc [ at] moneycrashers . com. Remember, you must forward us this e-mail in order to receive the 50 extra entries. Otherwise, we cannot cannot confirm that you have signed up. Related Posts: Richard Branson Makes It Easier To Borrow Money From Your Family Never Co-Sign A Car Loan For Anyone Mortgage Fees You Should Not Pay Watch Out For Mortgage and Housing Scams Democrats Weigh In On Solutions to Cleaning Up Mortgage Industry Lending Club Review – Peer to Peer Lending, a Solid Investment and Borrowing Alternative is a post from: Money Crashers

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Lending Club Review – Peer to Peer Lending, a Solid Investment and Borrowing Alternative