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Social Lending Sites Rising in Popularity

Posted April 1st, 2010
by Staff

If you’ve spent any amount of time looking for a personal loan, you’ve probably found that you don’t always have a lot of options. Banks are willing to make personal loans with reasonable rates of interest, but they only do so if you have a high credit score or if you’re willing to borrow thousands of dollars. Sometimes, you just need a couple hundred bucks to get your car fixed.

So, you turn to a payday lender, but they want to charge you 300 percent in interest or more. Fortunately, social lending sites are gaining in popularity and may have the personal loan solution that you need.

With these sites, you’re able to be matched up with someone who has money to lend. You enter into a loan contract with another person. These social lending sites are also known as “person to person” lending sites, because there isn’t generally a bank or other financial institution in the background providing the money for the loans. Actual real people are lending the money.

Here are some of the most popular social lending sites out there today:

  • Lending Club. This particular social lending website is one of the toughest out there. Before you are able to ask for a loan, the site will screen your credit score. This helps to reduce some of the risk to the lenders that are on the site. This one is fairly new and not yet available everywhere.
  • LendingKarma. LendingKarma is designed all around the loan agreement itself. It helps borrowers and lenders define the terms of the loan. There is a payment tracker for the loan, and there is the ability of lenders to help their borrower keep on track through the use of payment reminders.
  • Loanio. This site is an auction-based lending site. It allows lenders to look at credit information provided by the borrowers. The lenders can then place a bid on a part of a loan or on the entire loan based on how much they’re willing to lend, and what interest rate they’re willing to charge.
  • Prosper. This was at one time the largest of the social lending sites. However, it’s changing its platform now, and will be working only with lenders from California, but will be lending money to borrowers around the nation.
  • Virgin Money. This site was one of the social lending pioneers, having lent over $300 million since they opened in 2001. They specifically help to manage loans between friends and relatives.
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