One of the big news stories that everyone is constantly talking about is the lack of credit in the loan during this recession. Despite numerous attempts by the government to pump money into the lenders, credit remains tight. Yet, while the government and big banks are trying to maintain the status quo on lending, a dark horse is quietly gaining on traditional lenders, and providing a lot of credit must be tied to cash consumers.
This movement, known person to person lending (P2P, or as we call it), it's all about matching people who have money to invest with those who want to borrow money, and the drafting of an agreement for mutual benefit. Often, both parties will find that the rates are much nicer than what he could find at any bank. Investors or lenders, on average, are 9% -20% returns. Borrowers find similarly attractive rates.
P2P lending works as an investment vehicle, because the loan is considered short-term, usually no more than three years. And no P2P lending institution involved in mortgages, as it would create a completely different class loan that might not be beneficial for its members. The loans funded, and I've seen have ranged from debt consolidation loans home renovation loan, and even including the costs of college. In general, loans that banks generally will not touch due to a higher risk factor, but in exchange for the risk factor, you can lock in a rate higher yield.
Several companies were formed to capitalize on this growing trend. The two pioneers and Club Prosper Marketplace Loan. I've used both, and find their services to be top quality. They act like the eBay of loans, and lenders may search through the lists to decide which loan application will invest. Banks can invest a minimum of $ 25, and with the addition of potentially hundreds of others to invest in the notes, the loan will be funded. Prosper or LC, then collect the payments each month and distribute it accordingly. Prosper also has a feature that allows you to set a "plan portfolio," which will automatically invest in loans that meet your criteria. This is wonderful if you do not have time to wade through the many loan opportunities.
People are starting to awaken to the possibilities P2P loan gives them. Many investors choose to invest in this area, because then find that they can get better returns in the stock market or CD. Personally, I liked the idea that I will get income every month as interest on loans that I did.
P2P lending is an investment vehicle and loan that was approved by the SEC. In fact, Prosper CEO Chris Larsen has worked with the SEC to help create a whole class of rules for this emerging field. Rest assured, is not a fad or scam.
P2P lending has already gained a firm position in the credit markets. Already $ 4 billion in loans, is expected to double over the next few years. And as the credit markets continue to limit lending, more people are turning into this field to meet their needs. It 'a phenomenon that I believe will forever change the face of American finance.
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