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Social lending has become very popular. The economy has been suffering so much that most banks will not lend money to every day Americans. Americans are turning to social lending because this form of lending is much easier than borrowing money from banking institutions.
Websites such as prosper.com, virgin money, and lendingclub.com allow borrowers to get a loan from other people instead of banks or other lending institutions. The way that prosper.com works is that you write a brief summary that includes how much money you need to borrow and the highest interest rate you can afford. The lenders bid on your loan and after the bidding is over the loan money is given to you. There are fees and interest rates involved. Prosper.com charges a closing fee and the monthly payments are automatically withdrawn from your bank account.
Social lending is great for the economy. Most people are borrowing money to pay off debts, start businesses, repair their home, or get a car. The economy needs a shot in the arm. If people are not borrowing money from credit card companies and banks then our banks and credit card companies are less likely to fail due to the growing amount of delinquent credit card accounts. It also helps keeps to keep families financially stable so that they can survive through these rough economic times.
With these sites, you’re able to be matched up with someone who has money to lend. You enter into a loan contract with another person. These social lending sites are also known as “person to person” lending sites, because there isn’t generally a bank or other financial institution in the background providing the money for the loans. Actual real people are lending the money.
Here are some of the most popular social lending sites out there today:
- Lending Club. This particular social lending website is one of the toughest out there. Before you are able to ask for a loan, the site will screen your credit score. This helps to reduce some of the risk to the lenders that are on the site. This one is fairly new and not yet available everywhere.
- LendingKarma. LendingKarma is designed all around the loan agreement itself. It helps borrowers and lenders define the terms of the loan. There is a payment tracker for the loan, and there is the ability of lenders to help their borrower keep on track through the use of payment reminders.
- Loanio. This site is an auction-based lending site. It allows lenders to look at credit information provided by the borrowers. The lenders can then place a bid on a part of a loan or on the entire loan based on how much they’re willing to lend, and what interest rate they’re willing to charge.
- Prosper. This was at one time the largest of the social lending sites. However, it’s changing its platform now, and will be working only with lenders from California, but will be lending money to borrowers around the nation.
- Virgin Money. This site was one of the social lending pioneers, having lent over $300 million since they opened in 2001. They specifically help to manage loans between friends and relatives.