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Around the globe social lending is being used as an alternative to traditional bank and personal loans. Social lending sites connect individual lenders and borrowers through a peer-to-peer network that is streamlined, efficient, legally formatted, profitable, and most importantly a win-win for both parties. Social lending sites provide an opportunity to reduce loan rates and loan costs for borrowers and provide a rate of return for lenders which may beat investment alternatives. Your Cash Flow Mentor reviews the latest social lending sites below: Zopa is the world's first social finance company. Based in the U.K., it provides a marketplace for lenders and borrowers to make transactions. Zopa allows lenders to specify their rates and adds a twist by allowing other lenders to join in later with potentially lower interest rates (the net effect being an overall lower interest rate loan). It’s a “charitable” twist on the auction style interest rate competition Prosper uses.
Richard Branson started his music and business empire with a loan from his aunt so his new venture Virgin Money is close to his heart. This site manages business loans between relatives and friends while providing flexibility to both borrower and lender to negotiate their own loan terms. An exciting new service offered by Virgin Money is the Student Payback program which commits students to participating in the loan repayment program of private or federal loans with e-mail reminders, electronic debits, and documentation of the loan and repayment process.
Based in San Francisco, CA, Prosper has 830,000 members and offers loans from $1,000 to $25,000. Prosper seems to emphasize credit scores more and puts a focus on communicating how it enforces loan agreements. Prosper loans are typically a maximum of three years, and the company employees a reverse dutch auction at the end of each transaction in an effort to make loan rates more competitive. Prosper has placed $178 million in loans in their relatively short history. If you are a borrower and your loan is funded, you will be charged a percentage of the amount borrowed (1% -2%) or $25, whichever is greater, depending on your credit grade. Borrowers must have a credit score of 520 or higher and pass identity verification and anti-fraud checks). All Prosper loans are 3-year fully amortized loans with a fixed interest rates. Prosper is not accepting new lender applications until their securities registration process is complete.
The story behind this company has an interesting twist. Its original success began as a social lending application on Facebook and now the company operates independently. In sharp contrast from the other sites reviewed here, it isn’t currently accepting new lenders. Apparently the company is registering Member Payment Dependant notes with the Securities Exchange Commission totaling up to $600,000,000 and won’t accept new lenders until that pulls through. LendingClub advertises a fixed 7.88% loan on its site, though that certainly depends on the borrower’s credit. Overall the application process seems much simpler than with Zopa or Prosper, though there’s less opportunity to market your needs.
GlobeFunder is a secure, online lending marketplace where Borrowers are in control. By eliminating the traditional middleman, this unique lending platform offers lower costs to Borrowers for fast, efficient loans. Borrowers are able to post a loan request on the GlobeFunder marketplace for the amount you need, at an interest rate and repayment schedule right for you. Lenders must apply with GlobeFunder Ventures to become approved to fund loans on Globefunder. Fees are charged on loans set-up with ACH payment at 1.75%. Globefunder expects to service borrowers in all 50 states by the end of 2008, but are currently only licensed in the states of Alabama, Connecticut, Florida, Georgia, Hawaii, Indiana, Louisiana, Michigan, Missouri, Nebraska, New York, North Carolina, Oregon, Pennsylvania, Tennessee, Texas, Utah, and Wyoming. LoanBack creates a customized promissory note and payment schedule for loans arranged privately. Legally binding in all 50 states. Fees for loan forms range from $9.95 to $14.95.
CommunityLend is a social lending site based out of Canada. Currently in Beta, lenders and borrowers can sign-up at the site for more information. Fynanz is a social lending site designed specifically for college studentsand it blends traditional social lending with contract creation. Students in need of education financing creates a loan request on the Fynanz website for their loan. After the request is approved by Fynanz, the listing is posted on an online auction on the Fynanz site. Individual lenders who are also members of the Fynanz community, such as family, friends, alumni and others, can the bid to lower the financing costs for the students. The financing rate is set by a Base Rate based on the 1-month LIBOR (currently 3.62%) and a margin rate set by the online auction (ranges from 2.50% to 7.50%). Fynanz charges a 1% annual servicing fee for current loans. UPDATE: CURRENTLY FYNANZ IS NOT ACCEPTING NEW LENDER APPLICATIONS Loanio is a new peer lending site offering both a lending and borrowing platform. Visitors can check the interactive map at Loanio.com to find out if their state has certain restrictions for the amount and interest rate on their loans. Nearly all Loanio loans are between $1,000 and $25,000, but lenders can fund a loan partially for as little as $50.
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