Making a Profit on Investment From Social Lending Sites
January 6, 2010scfm 18 Comments »The worldwide lending industry is a multi-billion dollar industry where people borrow from banks, financial institutions and other private lenders. In the last couple of years, the lending industry has gone through an evolution and has given way to social lending as the new and promising mode of lending. Also known as peer- to- peer lending or person to person (P2P) lending, one of the first companies to set the base for social lending are Zopa, Prosper and more recently LendingClub.
Zopa is considered the first social lending marketplace in the world and its roots are in the United Kingdom. With the launch and immediate success of Zopa, other similar peer to peer lenders have sprung up like Prosper in the US, Boober in Netherlands and Smava in Germany.
If you are wondering whether the P2P loans offered at the social lending sites are worth it or not then the answer is most likely yes. There is not much of a difference as far as the P2P loans from these lending hubs and from a bank is concerned. The difference lies in the fact that there are no banks, no long procedures, and no middleman and above all the entire process is transparent for both the lenders and borrowers (no more hidden hard to find loan agreements!).
The main objective of the social lending hubs is to offer an online loan with the best interest rates and to make customers feel like they are borrowing from a friend or community. This peer to peer borrowing is increasingly being seen in a new light and is being considered as a part of community borrowing (which was more traditionally offered by small local community banks).
Other benefits:
1.class, which they can add to their portfolio because it doesn’t fall under an investment or even a savings account.
2.Choosing interest rates and loan repayment: There are several benefits for lenders as well as borrowers. In social lending hubs like Zopa or Prosper, lenders have the freedom and the flexibility to choose a loan repayment time period as well as the interest rate on the p2p loan.
3.Active community participation: one of the salient points is that this kind of a lending hub make borrowers feel as if they are following from an actual person and not an organization or a faceless institution. Hence it helps in developing a strong community feeling.
Lenders at any of the social lending websites have the power to set a minimum interest rate that they want to earn and can bid in an increment of $50 till $25,000 through loan listings. Borrowers can create a loan listing for a period of 3-years, and borrow an amortized and unsecured loan of up to $25,000 and also provide the maximum interest rate that they will be able to pay a lender.
The success of Zopa lies in its facts and figures. They are the largest lender today and have loaned out in excess of $930,000. The return on investment for lenders has been around 5.01%, which is healthy especially in the wake of the fact that social lending is still in its nascent stages. One of the top lenders even got an ROI of 19.8% on social lending websites.
The Lenders
By now you are probably thinking who these lenders really are? Are they banks in disguise or are they really other people? The truth is that they are really people. Let’s take Zopa and Prosper for example. Both the social lending hubs are backed by Benchmark Capital who also funded eBay. Zopa or Prosper are the best alternatives that anyone can have to banks or other financial lending institutions, however they are restricted to the UK and US markets.
The current business model of Zopa is based on a 1% exchange fee that borrowers are paying them upfront. In return, Zopa is offering borrowers a better interest rate by cutting out the bank middleman. More than that, a borrower will have more control of the entire lending process and has the flexibility to establish an interest rate.
Zopa is the acronym for Zone of Possible Agreement, and its lenders include only U.K. residents who are over 18 years of age. To qualify as a lender, a person needs to have a valid bank account and a high personal Equifax credit rating. There are two restrictions for becoming a lender and they are:
•Lenders have to be individuals and not businesses.
•Lenders will not be allowed to have anything in excess of £25,000 ($47,000) in outstanding loans at a given point in time.
The American counterpart of Zopa is Prosper and they also handle maximum loan of $25,000 at a time. At this point the future of social lending looks bright as it has now hit New Zealand and Australia with the first peer to peer lending hub in Australia to launch shortly being Lending Hub (you can see their site at lendinghub.com.au and their active blog at blog.lendinghub.com.au) which will offer P2P loans with a strong community focus to ensure a truly social experience for both borrowers and lenders rather than just being a transactional online loan tool.
Question about lending
When would the banks start lending to corporates in India again?Although all of the Indian banks are sitting on enough liquid cash, they are still not lending. If they do lend, interest rates are as high as 14-27% !
How much time would it take for it to get comfortable or at least better for the Indian corporates??
Thanks in advance!
Tags: Community Lending, p2p lending, peer to peer, Social Lending, Social Lending Hubs
Posted on January 6th, 2010 at 6:07 am
there is no more relevant commercial for the 2000’s
Posted on January 6th, 2010 at 6:17 am
They will start in the next 60 days. They don't want to be blamed if the crisis continues and they did nothing..
Posted on January 6th, 2010 at 6:49 am
The government has to regulate these debtors to within a certain percentage
(example: canada government student loans will do prime + 1% – always.)
it is harder in the us because all the statutes that make america what it is say that government regulation is wrong. this way the rich get richer and the poor get worse.
a free market is a free market and to regulate would change the entire american way of life.
if you've already got your education, claim bankruptcy and screw those guys.
Posted on January 6th, 2010 at 7:11 am
BALLS
Posted on January 6th, 2010 at 7:31 am
Lending institutions are in the business of making money. At this point, the best return they will get for their dollars is a loan to a business or consumer. Stocks and bonds are too volatile right now. Holding funds in a savings-type account doesn't generate any worthwhile interest. There aren't many other options.
There is much confusion and uncertainty around the tax payer funds. The lending institutions did not get a bunch of money from the government to do with as they please and with no strings attached. The lenders are trying to figure out what they can do with the funds and what strings are attached. Lenders are not really reaping a lot of rewards right now.
Hope this helps. Good luck!
Posted on January 6th, 2010 at 9:46 am
I am Mrs Amy John,currently living in texas,USA.I am a widow at the moment with three kids and i was stuck in a financial situation by may 2009 and i needed to refinance and pay my bills.I tried seeking loans from various loan firms both private and corporate but never with success,and most banks declined my credit.But as God would have it,i was introduced to a man of God a private loan lender by name Mr Endurance Dawn who gave me a loan of $28,000USD and today am a business owner and my kids are doing well at the moment.So dear,if you must contact any firm with reference to securing a loan with low interest rate of 3% and better repayment plans and schedule,please contactMr Endurance Dawn.He doesn't know that am doing this but am so happy now and i decided to let people know more about him and also i want God to bless him more.You can contact him through his email at endurancelendingfirm@gmail.com
Posted on January 6th, 2010 at 12:02 pm
You need to contact your State attorney generals office and they are the ones who handle this type of scam.~
Has anyone been scammed out of money from Caldwell Lending Group?
I was guaranteed a $15K unsecured loan from Caldwell Lending Group. I was asked to send $2250 to private lender in Canada via wire transfer. …
Posted on January 6th, 2010 at 1:13 pm
This commercial came out several years BEFORE the recession. Soccer moms and Hummer Dads CANNOT claim that were not warned.
Serves the snotty dumbasses right, IMO.
Posted on January 6th, 2010 at 4:40 pm
Was this made in 2002? =
Posted on January 6th, 2010 at 9:44 pm
Actually 100k is a small sum and unlikely enough to build an average sized house. The interest would also be VERY high, it would take you many years to pay this off. There is also the problem of collateral, since this is not a construction loan you need to cover it with something other then the property you will supposedly build.
With you borrowing such a small amount of money banks would not be very inspired to risk a year with no payment to discover you are defaulting when the payment is due.
Posted on January 7th, 2010 at 8:57 am
lol this is one of my dad’s favorite commercials
Posted on January 7th, 2010 at 12:38 pm
This is the funniest shit ever.
Like my car? It’s NEW.
LOLOLOLOLOL!
Posted on January 8th, 2010 at 7:38 am
OMG this is the funniest commercial EVER!
Posted on January 8th, 2010 at 8:47 am
Not hard at all. Lenders cannot discriminate based on age. What they will look at is credit, loan-to-value, qualifying ratios, etc. Have them speak with a reputable lender and get pre-approved so they know what they can qualify for prior to making any move.
Posted on January 8th, 2010 at 3:03 pm
I really don't know what type of insurance Museums carry but if they have "bailees" coverage, it covers property of others while in their care, custody and control. I would ask the museum. I'm sure they would be glad to answer that part of your question.
Reducing cost is another matter. It it a very valuable painting, and I'm assuming it is based on our question, I wouldn't try to cut corners in order to save a few bucks. You can insure it only against certain named perils, but if something outside of those perils happens, the painting wouldn't be covered. For instance, if you didn't cover it for theft and it was stolen, it wouldn't be covered.
If you want to keep it in the family, why not volunteer to help defray the cost of insurance. Chip in and it would allow them to keep the painting so that you could one day have the burden of insuring it. lol
Posted on January 8th, 2010 at 8:15 pm
The problem is not banks not lending to each other, it is banks not lending to people and companies. Lending allows people to buy houses, cars, etc. When people buy houses, cars, appliances, someone has to build them. Thus, jobs are created. In order to build things, you must have not only labor, but also the infrastructure (machinery) to build the things. Companies need capital to buy the machinery to put the people to work to build things. If the banks don't lend, then the companies can't invest and create jobs, and nothing gets built, so no one can buy anything.
If you think about building one house (then multiply by millions), you can see why people buying new houses (needing credit) is important – in one house, you need the wood to build the house (providing jobs to lumbermen), you need the wallboard, nails, etc. (providing factory jobs), you need the plumbing, heating and electrical, appliances, etc. (more factory jobs), then you need to landscape (agriculture or research jobs for the seed, turf, plants, etc.). Then, these folks who are put to work to supply the stuff to build houses spend their money at local restaurants, grocery stores, car dealerships, appliance stores, etc., creating additional demand (and hopefully paying back old debt). This multiplies through the economy.
So, banks loosening credit is seen as a way to invite investment in the economy, creating jobs, and dragging us out of the recession.
Posted on January 9th, 2010 at 1:31 am
How true is this for America. When will we wake up and act like adults and take back our lives and our country…
Posted on January 9th, 2010 at 1:33 am
reguardless of credt history? so i can have a 320 fico score and still get a loan! oh shizzle! do they finance bling?