Peer-to-peer lending sites better for borrowers than lenders on clarkhoward.com

Have you been turned down by the bank for a loan? Why not borrow directly from your fellow man online using a peer-to-peer lending site?

Prosper.com is the granddaddy in this arena, while LendingClub.com is another extremely popular site.

Clark has long believed that P2P lenders offer so much for borrowers, but there's relatively little upside for lenders.

For borrowers, the biggest challenge is that you need a minimum level of credit worthiness to participate. As an example, PertuityDirect.com requires a 660 credit score.

The interest rates you pay as a borrower vary by website. With Propser, it tends to be between 7% and 24%. (Editor's note: As of June 2, 2009, Prosper is not coordinating any borrowing or lending, pending a completion of the company's SEC registration.)

For lenders, The Wall Street Journal now reports they get a return on their money of under 3%. Not too enticing considering you can get a better return on CDs with no risk!

Finally, there's one oddball P2P option from Richard Branson. VirginMoneyUS.com is designed to help you make loans to friends and family members. The company handles all the paperwork, including sending notices about payments and collecting on debts in the event of default.

They even harass your family for you so you can preserve your relationships!

Editor's note: As of early 2010, Virgin Money is no longer accepting new loans for servicing.

What others are saying

peer to peer lending
The rules sound just like the bank. 25% or less debt to income ratio, high credit score. I have great credit, always pay on time..I just have too much and would like to consolidate my bills but no one will let me.
By Pickles @ 06/03/09 10:10:08 PMreport abuse
Need some experience as lender/investor
Prosper is quiet (lenders) due to SEC filing. The Lending Club has gone thru SEC. I am member of both. Higher default rates at Prosper when I took recommendations-Lower when used past credit evaluation skills. The Lending Club is growing a bit more slowly by design. Met management and their staff takes into account the education on how to manage risk. The process is not put in cash and forget. You must follow a learning curve ,don't sell the farm to do it, due diligence and invest accordingly. In short not for everyone and expect to gain about 95% of the time. Presently what investments now are doing respectable returns?
By Howbar @ 06/03/09 12:24:59 PMreport abuse
bankrupcy
before you lend via peer-to-peer, read the prospectus very, very carefully! what will happen to your money if prosper or lending club goes bankrupt? is your money secured by the loans you make? if you don't know the answer, read the prospectus! you can lose a lot more money than you think.
By bran flake @ 06/02/09 06:27:33 PMreport abuse
Too good to be true
The old saying that if it seems too good to be true, it is probably not true. I keep thinking these peer-to-peer lending sights will turn out to be not as advertised. I'd give these another year before trying them.
By Buzz G @ 06/02/09 05:24:40 PMreport abuse

peer to peer lending

The rules sound just like the bank. 25% or less debt to income ratio, high credit score. I have great credit, always pay on time..I just have too much and would like to consolidate my bills but no one will let me.

By Pickles @ 06/03/09 10:10:08 PMreport abuse

Need some experience as lender/investor

Prosper is quiet (lenders) due to SEC filing. The Lending Club has gone thru SEC. I am member of both. Higher default rates at Prosper when I took recommendations-Lower when used past credit evaluation skills. The Lending Club is growing a bit more slowly by design. Met management and their staff takes into account the education on how to manage risk. The process is not put in cash and forget. You must follow a learning curve ,don't sell the farm to do it, due diligence and invest accordingly. In short not for everyone and expect to gain about 95% of the time. Presently what investments now are doing respectable returns?

By Howbar @ 06/03/09 12:24:59 PMreport abuse

bankrupcy

before you lend via peer-to-peer, read the prospectus very, very carefully! what will happen to your money if prosper or lending club goes bankrupt? is your money secured by the loans you make? if you don't know the answer, read the prospectus! you can lose a lot more money than you think.

By bran flake @ 06/02/09 06:27:33 PMreport abuse

Too good to be true

The old saying that if it seems too good to be true, it is probably not true. I keep thinking these peer-to-peer lending sights will turn out to be not as advertised. I'd give these another year before trying them.

By Buzz G @ 06/02/09 05:24:40 PMreport abuse

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Jun 02, 2009 -- Peer-to-peer lending sites better for borrowers than lenders

What others are saying