Peer to Peer Lending, Get a Loan Without a Bank

Is it time to consider peer to peer lending? With the credit markets in turmoil and warnings of the credit markets freezing up, it may become more difficult for average people to qualify for bank loans. People may find themselves unable to borrow money from the banks for things like buying a new or used car, paying for college, making emergency home repairs, or starting a new business. Likewise, many of those people who do have some money saved up are wary of investing in Wall Street stocks. The combination of all these factors may be lining up to give a big boost to the notion of peer to peer lending.

What is Peer to Peer Lending?

Peer to peer lending is people lending money to other people without a bank's involvement. Websites like prosper.com offer borrowers a chance to make the case for their creditworthiness to lenders. These websites show prospective lenders the applicant's credit history, and current financial situation. This might include information like current income, current expenses, job history, any history of bankruptcies or delinquent payments, their credit rating and more.

Peer to Peer Lending Affiliation Groups

Applicants at peer to peer lending have a chance to tell peer to peer lenders why they need the loan and how they will pay it back. Some peer to peer lending sites allow lenders and borrowers to identify or group themselves by interests or other affiliation. For example, you might find an alumni group from a particular college that prefers to lend money to other alumni, or a group with a certain religious affiliation that prefers to engage in peer to peer lending with borrowers of their own faith.

Peer to Peer Lending Risk

Peer to peer lending is not without significant risk and is certainly not for everyone. While some people rush in to lend money to borrowers willing to pay 30% or more annual interest, there is usually a good reason why they are willing to pay such high peer to peer lending interest rates and that reason is usually connected to their ability to pay it back. More conservative peer to peer lending participants aim for AA rated borrowers who might borrow at a rate of 8%-10% interest. Of course, there are all sorts of peer to peer lending borrowers and lenders. Some are good risks and some are not. It certainly behooves anyone considering peer to peer lending to do their research before investing their money.