The Pros and Cons of Social Lending
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With faith in banks and credit card companies on the decline, more consumers are turning to social lending as an alternative to existing financial institutions for their borrowing needs. The worst offenders, credit card companies, have been lowering credit limits and increasing penalty fees and interest rates on even their most loyal customers. For this reason, frustrated credit card holders comprise one of the largest sectors looking into lending sites to refinance credit card debt. With interest rates as low as 7.8% at some social lending sites, 10% to 15% less than credit card companies and banks, consumers are giving this option a hard look.
One reason lending communities can offer such low interest rates, is because they operate only online. The higher overhead and operating costs associated with brick and mortar facilities are not there. These savings are then transferred to both lenders and borrowers in the form of lower service fees and higher returns.
Lending Club, one of the most popular person-to-person (P2P) lending sites, facilitates the selling of loans in the form of unsecured notes registered with the Securities Exchange Commission. The loans can be used for funding many of life’s necessities such as a baby on the way, buying a car, purchasing a home, paying off student loans or to cover medical bills. The site has become increasingly popular since 2007, mostly due to both the lending options it offers borrowers with various credit backgrounds and the investing opportunities it offers lenders.
Advantages
Borrowers who might not be able to get a loan through a bank because of a spotty credit history may have a better chance of getting one through a lending site, although it will cost more in terms of a higher interest. Sites like Lending Club offer a range of possibilities for consumers with varying credit scores. Those who have a good credit score can expect to pay around 7.89% per loan. Borrowers on the other end of the spectrum can pay as much as 21%. All loans have 3-year terms. Borrowers can ...
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Categories: Uncategorized Tags: Baby On The Way, Better Chance, Borrowers, Brick And Mortar, Credit Card Debt, Credit Card Holders, Credit History, Credit Scores, Decline, Financial Institutions, Lenders, Low Interest Rates, Medical Bills, Necessities, Paying Off Student Loans, Person To Person, Pros And Cons