Be The Bank – P2P Online Lending
When I was growing up, I enjoyed playing Monopoly and particularly enjoyed handling the bank. At one point in my career, I worked for a bank. But until recently, I never thought in terms of being the bank. That all changed when I discovered Person-to-person (P2P) Lending on an eBay-like website where people (”borrowers”) post a request for an unsecured loan of up to $25,000 at a maximum interest rate they’re willing to pay. Then other people, like me (”lenders”), place bids in a reverse Dutch auction, for the amount and rate they’re willing to lend, usually for a piece of the loan (at least $50).
On one site, borrowers provide their annual income so a debt to income ratio can be determined and displayed. A credit check is run and a borrower’s credit grade is also determined and displayed. The site has over 1,200 loans listed currently. They range from $5,000 at 4.75% interest for home remodeling (1 bid) to $3,000 at 29% interest to consolidate credit card debt (12 bids).
Lenders create a link to their bank account, transfer funds to the auction site, and begin placing bids. When a fully-funded listing ends, a single loan is created from bids with the lowest rates. The site automates much of the operation for the lender including withdrawing monthly payments from the borrower’s bank account and distributing them proportionately to the lenders’ accounts.
Not every loan request will get fully funded, but those that do Read more…
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