Marketplace lending is a fairly simple concept to understand, but many people still have never heard of it or are afraid of it. My goal here at Peer Social Lending is to educate borrowers on the options they have as a borrower and to help investors of all types maximize their returns. The concept is simple; a borrower applies for a loan through the any of the marketplace lending websites. The biggest originators are currently Lending Club and Prosper. The borrower provides all relevant information and are given a rate at which they can borrow. The borrower pays an origination fee (between 1.11% to 5% of the loan amount depending on loan grade for Lending Club) and the loan is submitted for funding.
If you are a borrower, be sure to check out my borrower resources page.
This is where investors come in. As an investor, you have access to lend to individuals and buy a portion of their note. The idea is that you diversify your investment over many different loans to reduce your risk. Notes are funded by many different investors and subject to the review process. The borrower is responsible for principal and interest payments for the course of the loan (36 or 60 months) and as an investor are charged a small portion of the payment received from the borrowers. The returns - the weighted average of all borrower notes you own minus the default rate are your return. We call this the spread, which is how banks have made money for years. Another way to look marketplace lending is that the group of people who fund a loan are simply acting as a bank would. However, instead of the profits going to huge corporations, they are split up among all of the investors. This is what makes marketplace lending so special.
If you are an investor, I first recommend signing up for my email list and receiving our free beginners guide to Lending Club below. Don’t worry, you can unsubscribe at any time. Once you review, please feel free to reach out to me and ask questions. That is why this site exists today. Additionally, you can ask questions and learn a lot from the Lend Academy Forum.
Once you have decided to invest in Lending Club, I recommend you check out some of the below posts.
Lending Club Returns:
Lending Club features:
- Recent Listing Filter
- Peer to Peer Lending Automation – The Key to Investing in Lending Club
- Lending Club Automated Investing vs. Third Party Automation
- Using FOLIOfn to Maximize P2P Lending Returns – Part 1
- Using FOLIOfn to Maximize P2P Lending Returns – Part 2
- Using FOLIOfn to Maximize P2P Lending Returns – Part 3
- Using FOLIOfn to Maximize P2P Lending Returns – Part 4
Dig Deeper - Q & A Sessions
- Q & A with NoteX360 – Execution Services for the Alternative Lending Market
- Q & A with Nickel Steamroller – A Look Into What’s to Come
- Q & A with LendingRobot – Third Party Automated Investing Tool for Lending Club
- Q & A with Looking Glass Investments - Institutional P2P Firm
- Q & A with GROUNDFLOOR - New P2P Lending Company
Finally you may find it valuable to check out our page where we feature other resources for peer to peer lending on the web.