P2P Lending as an option to traditional banking system

[paultorres365]

I am quite interested in p2p lending and borrowing, it seems to be as option to the traditional banking system, sites like zopa, yes-secure and many other are fast increasing in numbers and as well as in the amount they are lending to borrowers.

Do you think that p2p lending is realy helpful, please share your experiences.

[mrpaseo]

I have little to no experience but there are two sides tot his topic, the lending and the borrowing.

First the borrowing because I have less info on this...lol. It seems to me that the sites screen the borrowers well. You as a borrower fill out a request, much the same way you do at the bank. They screen you and approve or deny your request.

Once you are approved (Or even before you are approved), you are put on a list and people (The lenders) read what you wrote and if they feel comfortable with your application, they put as little as $25 towards your loan. You have 14 days to get your loan funded. After the 14 days, the loan is denied due to lack of funding. From what I can tell, the more info you have in the loan to show you are taking care of your finances, the better chance you have of getting funded. I saw some that just went in and filled the sheet out but did not put any additional info like a quick plea of why you need the money and they were just skipped over.

Many of the loans are for debt consolidation which is a red flag in the first place but they are there because they are trying to fix themselves. Hopefully, they will not dig themselves back into debt like most debt consolidators do. That is the risk you take as a lender.

As for the lenders, the process is pretty easy, you sign up, connect an account, send some money to their site then this is where it gets tricky....

Some states allow you to do this lending so you go in, look at the applications and commit your money towards the loans that you like. Once enough people fully fund the loan, it goes thru and in a month, you will start getting payments with interest.

Some states do not allow this P2P lending... but they allow you to purchase the loans after they have been funded... from others that were allowed to read and fund the loans. Once they are owned by lenders, the lenders can put their piece of the loan up for sale... usually for a premium... which is pretty dumb in my opinion. (I happen to be in one of these states so I am talking from first hand experience). Once I went to this second level investing, it seems the people purchased the loans for 36 or 60 months, then went directly to this second level to sell for more than they paid for it... so if you purchase the loan, even if every payment is made... you will not get your money back even with the interest payments... They even had loans that were defaulted or with NO payments remaining for sale... praying on the ignorant is what they were doing.

Default loans... The site has a process that they use to contact the person that they loaned the money to and they post what they have done on line so the lenders can see. So when they call the persons work, they post it, when they receive contact, they post it etc. If they do not receive payment, it is sent to a collection agency... I'm not sure what happens at that point. I have not actually bid on any loans at this point and I'm probably going to back out without investing any money since I can not bid on the loans at the beginning.

If you have any questions I will try to answer them,
Ray

[sblatner]

I have been an investor at Lending Club for over a year. I'm averaging a 6% return. I have had some defaults but the interest I make on the other loans is more than making up for the defaults. My return includes the defaults to I'm doing much better than I would at a bank.

[Slug]

Do a search for "prosper" or "lending club" in the forums. There have been lots of threads on this over the past couple of years.