The original premise behind “peer to peer” or “P2P” loans was to cut out the middleman—banks—and to match individuals who have money to lend (lenders/investors) with individuals who need to borrow money. The premise was that lender/investors can earn a better return on their money by lending directly. In addition, these companies sold lenders on the idea that they could spread out their risk by lending small amounts of money to many different borrowers.
LendingClub.com and Prosper.com are two of the earliest major players in this space, and they have both been very successful with this model. So successful in fact, that it’s no longer just individual lenders providing the funds for these loans. Large investors such as pension funds and institutional investors are major lenders for these platforms now, too.
Borrowers who qualify typically get a loan with a fixed interest rate and fixed monthly payments. Often these loans are used by individuals who are starting, or growing a business. If you are looking for a personal loan and have a good credit score, you may want to check out a P2P lender. It is expected that more lenders will get into this business as it grows in popularity. For more information on these lenders visit the Resource Section in my book Finance Your Own Business: Get on the Financing Fast Track. This content is copyrighted.
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About the Authors
Garrett Sutton, Esq., author of Start Your own Corporation, Run Your Own Corporation, Loopholes of Real Estate, The ABC’s of Getting Out of Debt, Writing Winning Business Plans and Buying and Selling a Business in the Rich Dad Advisors series, is an attorney with over twenty-five years experience in assisting individuals and businesses to determine their appropriate corporate structure, limit their liability, protect their assets and advance their financial, personal and credit success goals.
Gerri Detweiler is the author of four books, including the Ultimate Credit Handbook (named one of the top five personal finance books of the year when it was released), and a media favorite quoted in publications like USA Today, The Wall Street Journal and featured on The Today Show and CNN. A credit educator since 1987, she’s served on credit reporting agency Experian’s Consumer Advisory Council twice.