Peer-to-Peer Lending seems to be a controversial subject in the personal finance world. Sites such as Prosper and Zopa offer Peer-2-Peer Lending, allowing individuals to engage in financial transactions such as lending or borrowing without the intermediation of a traditional financial institution. Prospective lenders bid on borrowers ebay style - The borrowers post the maximum interest rate they are willing to make on their loan, and the lenders go to a bid war trying to offer a better interest rate. Borrower’s credit history and debt ratio are appraised by the site and are given a credit score on their profile ranging from AA all the way to D, so lenders can have a general idea about the person they are bidding on. Some Lenders are claiming returns of up to 10-19%. Sounds great so sign me up! Wait just a second. I needed to research a little more and with all the good that I found, I found an equal amount of bad. There were a fair share of horror stories of borrowers defaulting on their loans and failure of the company to collect. Ugh. There were also lenders who mentioned that their returns were no better than your average CD after fees and tax. Why all the risk, when you can go with a secure CD? I personally haven’t dabbled with P2P lending, but despite all the negatives, it still has me interested. I don’t think that this can be used as a viable means for alternative income or investing just yet, but it can be something FUN to experiment with your play money. Depending on my expenses this month, I may throw the minimum $50 to test it out so I’ll keep you posted.
May 30 2008
- Mark Gavagan on P2P Lending - Viable Alternative Income?
- Financial Md » Compound my Interest! on Compound my Interest!
- Financial Tracking - Software beats Paper II | Cashola on Financial Tracking - Software beats Paper
- Roth IRA defeats Credit Card debt | Cashola on How to get a better interest rate on Savings
- Aaron Wakling on The Cure for High Interest Credit Card Blues