Sunday, January 5, 2014

Understanding the Process of Peer to peer Lending

Loans
Loans (Photo credit: zingbot)
With economic sanctions making their way throughout the world, securing a loan, the normal way is not easy. Banks throughout the world have been finding it difficult to give loans to people who have a perfect credit rating.

In case, you have low or average credit rating, securing a loan gets all the more difficult. All these complications and difficulties have led to the evolution of social lending.

Social lending is a lending system which is moderated through internet. Consumers in social lending process borrow money from other people.

Online Social Lending Clubs

  • Each new member can register as a borrower or lender in these online social lending clubs.
  • Lenders can choose their distinct interest rates while offering loans.
  • Lenders make good returns on these online social lending clubs.
Those interested in borrowing from these online social lending clubs are drawn to these peer to peer lending sites as they offer easy loans. However, the annual interest rates can be extremely higher and can go up to 35%.

For those who have a good credit history, peer to peer lending sites is a great way of securing short term loans. Much time is saved as the tedious process of going through the general banking procedures while securing a loan need not be observed.

The popularity of online social lending clubs can be gauged from the fact that these sites have been able to finance half a billion dollar loan in past several years. According to a report published in Slate Magazine, the popularity of these sites continues to grow with each passing year and they have successfully accomplished their real objective.

History of Lending Clubs


Lending clubs own their existence to micro lending movement and the current economic scenario has fuelled the success of these clubs. Most of these lending clubs have come up in recent times.

Entrepreneurs in third world countries have benefitted from social lending site Kiva.org which was the first one to make its presence felt in the business. The site came up with the idea of offering money to the borrowers and to support them in the need of their hour.

Loan Application Process


Peer to peer loans can be sought easily from these lending clubs. A borrower only needs to fill in an application on the lending club’s website. A distinct advantage of using this service is that the borrower will be notified immediately about the interest rate at which the loan would be available.

Investors who wish to offer this loan have a two week’s time to complete all the formalities. As the loan gets funded, the amount is transferred to your account. The first payment on the borrowers part is made a month after the processing of the loan.

All the associated paperwork is managed by the lending club and this makes the repayment process extremely easy to manage. A few states however, have regulatory sanctions in place which restrict the lender from investing money in these sites.

Crosschecking before making investments will work to your advantage and you will reap benefits in the long run.

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