I was just reading an article that I found on Stumble Upon that made me mad! Well ok not really mad because I am a pretty mellow person, but lets just say I didn’t agree with it. The name of their post is pretty much the opposite of mine it was: Why I think P2p lending is a bad idea. So in this post I will try to prove to you otherwise and tell you about my positive experience with p2p lending sites.
Quick p2p history
Ok, so if you havn’t heard of p2p lending I am going to try to catch you up real fast because this is not really the point of the post. Peer to Peer (p2p) lending is essentially people with a little extra cash helping out those who need a little extra cash by giving them better interest rates than they would other wise get from a credit card.
Why P2P lending helps borrowers.
1) Borrowers can get credit that they would not have otherwise been able to get. With the credit crunch as it is, it is becoming increasingly hard to obtain credit. Many ordinary folks with good to decent credit are no longer able to obtain credit. I know you may be saying to yourself ” Credit is bad, these people would be better off without credit”. Well I disagree. Currently the market is looking pretty rough, some people would not be able to put food on their table without credit. If enough people had credit, the economy would get a boost and then they would have jobs to be able to pay back their loans.
2) Borrowers can get lower rates than they would from credit cards. Even though the Fed has been dropping rates left and right, credit card rates have stayed high. This is due to a dry up of credit. It is getting hard for common people to get credit anymore. Prosper and other p2p lending sites’ rates have been holding steady. This is because there is still around the same supply of people lending on these sites and the popularity of p2p throughout the blogosphere.
Why P2P lending helps lenders
1) Much Better rates! Right now the stock market is way down. Most analysts predict it to be going down or making small gains for the next few years. Investors need a place to put their money. P2P lending is an excellent place to put this. If you invest in the people with decent credit scores, you will get pretty good rates of return.
2) Good diversification. With most of the major p2p lending sites like Prosper , you can invest as little as $50 per person. If you are investing a few thousand dollars, you can have your money spread out amongst 100′s of people. All the major investors praise diversification.
3) Helping others. This is a big part of the reason I lend on p2p sites. I mainly bid on loans that are looking for debt consolidation. With these loans, borrowers are allowed to pay off all their credit cards and put all of their debt into one single, lower payment. The rates are always lower than they would to be to the credit card banks. I am letting them keep more of their own money.
One of the points that the author of the post I am responding to said was that the only reason people are promoting p2p lending is for referrals. Well in this post I HAVE USED NO REFERRAL LINKS. I would hate to be discredited by something as stupid as that. I have been investing in Prosper for a while now and have no defaults or late payments. Every one I have lent to has paid me back on time. I am currently putting another $1k into my account because I like it so much
The only reason I would put in the referring link is so that potential new lenders could receive the $25 dollar bonus that Prosper offers if they want to sign up. I am not going to put a link in my post but I will have a banner on my sidebar that is an affiliate link. If you read this and are interested in signing up, then click that banner and you will receive $25 after your first loan and so will I.