Peer Lending Networks Offer Last Chance Loans

Community Lending Websites offer Loan Auctions between regular people, similar to merchandise auctions on eBay, that allow you to get a loan if you’ve been turned down for loans by traditional lending institutions.

If you can’t get a loan from a traditional lender, or even if you can and you want to explore alternative loan options with the possibility of lower interest rates, you may want to consider a peer-to-peer lending network.

If you have additional savings that you’d like to invest, peer-to-peer lending groups provide you with the opportunity to lend money at lucrative interest rates, but you’ll have to choose loans wisely in order to minimize your risks.

Lending Club is a reliable peer lending network for high-interest returns on investments or low-interest personal loans, and Prosper.com has done over 81 million in loans and is a very popular community lending website in the U.S., but Zopa.com is an international leader in the peer lending industry that you may also wish to consider.

Loanio is a relatively new peer-to-peer lending network that is currently offering a $25 sign-up bonus when you register and make your first loan.

Here’s how peer loan networks work.

Borrowers list the amount of money they need and the highest interest rate they are willing or able to pay, and then lenders bid on the portion of that loan that they are willing to lend with the interest rate they are willing to offer.

When the listing ends, the borrower gets their loan at the lowest possible interest rate, and the lenders get paid off over a set period of time while earning a profit on the interest charges.

The community lending websites make their profit by charging borrowers a small percentage of their loans and charging lenders a small percentage of their payments received, so lenders and borrowers have to take that into account when calculating APRs.

The benefit for borrowers is that you’ll have the opportunity to get a loan that you otherwise may not have access to and possibly with a lower interest rate, although not always.

Peer loan networks are especially beneficial for poor credit borrowers that have been turned down for loans by banks and other lending institutions. Lending communities can offer you a last chance loan if you’re desperate to consolidate high-interest credit card debt or just can’t get a loan anywhere else.

However, these loans will adversely affect your credit if you don’t follow the terms of your loan and make your payments, so it is important to borrow money wisely and make your payments on time. Doing so will rebuild your credit and give you the opportunity to receive better interest rates in the future.

Some borrowers with average credit may be able to get better interest rates on loans than they would through traditional lending institutions, but that is not always true, so review current loan listings for similar loan requests to see what type of interest rate you can expect to receive. You’ll also have to consider the additional fees that the lending networks will charge.

However, borrowers with above average credit or excellent credit will probably get better interest rates through traditional lending options such as personal bank loans, lines of credit and credit card loans.

Lenders interested in making some money through lending networks will have to choose their borrowers wisely and consider the risks.

Although you can get a higher interest return from borrowers with poor credit, the risk is also higher making it more likely you’ll never get the full amount repaid. These are unsecured loans, so if the borrowers don’t pay, you may not get your money back. Defaulted loans go into collection and eventually get sold off or possibly just written off. Either way, you could lose money.

On the other hand, if you diversify your lending by making small loans to multiple borrowers with acceptable risk levels, you can get a really nice return on your investment, but it will definitely require research and diligence.

It’s worth mentioning that not all lending websites are for profit, and networks like
Kiva.org allow concerned community members to lend money to people in developing countries that seek loans to grow their businesses or otherwise advance themselves.

Personal lending communities or peer-to-peer loan networks offer a viable option to traditional lending institutions, especially if you can’t get a loan, have poor credit, or are otherwise unable to obtain a loan with an interest rate that you can afford.

Comments

  1. Think Money says

    Haven’t heard of Zopa before…

    Am definitely planning to start lending on Kiva at some point though … great idea and cause.

  2. deb says

    I’m looking for a home construction loan to build a home on my own land. I’ve been turned down everywhere else, can you help?

  3. richard dorsey says

    I need a last chance loan willing to pay high interest beats payday loans, can pay back through auto-pay

  4. Robin says

    Med. Retired veteran with monthly income and very bad credit. in need of a home loan. $100,000 to $150,000

  5. L McCain says

    I looked at the sites you provided and they ALL say that you have to have good credit. So where are the peer-to-peer sites that don’t require good credit? I really need to know. I am in need of a car and am between two rocks and five hard places.

  6. jeremy Westfall says

    I need a auto refinance loan so i can get my truck out of bad terms with the bank. Can make the payments now, just couldn’t before and now i cant pay back enough to get it back in the good. Can anyone help.

  7. says

    Hello Jeremy,

    If you’re looking for a loan from a peer lending network, then Lending Club is probably your best option.

    http://www.maximizingmoney.com/personal-loan-deals/lending-club-peer-lending-network-offers-low-interest-rates-for-qualified-borrowers/

    However, you will need a credit score of 660 to qualify for a loan, so hopefully you will be able to qualify.

    You could apply for a loan through Lending Club and then pay off your auto loan from the bank.

    Hope this helps, good luck to you.

  8. Kathy says

    Had great credit then economy hit hard. Where can I search for P2P lender to purchase mobile home and rent to own to me. 24 yrs old,have 7 week daughter getting married, really need a place to call home.3 of us living in a small 7×14 room. Very tense situation.

  9. Becky says

    Looking to refi our home to help my daughter with college. Home appraises of aprox 85k, we currently owe 32K. We had some medical collections when I suffered a stroke in 2011 which ruined our credit, all have been paid, and I have documentations to prove it. (Just have difficultly getting our credit reports to reflect it). We would like to consolidate other debt, get college money, and some home improvements. Looking for 70k loan with a ten year term. Can you help? I have retirement income, hubby has been at the same job for 28 years.

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