Peer-to-peer lending or P2P is a term that can include both lending to family and friends and more formal private lending arrangements. Many people have relied on peer-to-peer lending in a casual situation. If you have ever borrowed or loaned money to a friend for lunch or to help out in a financial emergency you are already a peer-to-peer borrower or lender. It also includes one on one lending organized by a peer-to-peer or microlending service of one sort or another. What formal peer-to-peer lending options exist? What should you do if you are considering entering into one of these situations with friends, family or business associates to protect everyone’s interests?
Rising popularity of Peer lending has been featured in the media recently, with articles appearing in a variety of publications, including the New York Times & USA Today. Several sites online that allow auction style lending arrangements, including Lending Club, Virgin Money, P2P Lending, Prosper.com and Loanio.com. In Prosper Marketplace, Inc. the website manages the auction, buyer identity confirmation and loan repayment. Lending Club at Lendingclub.com combines social networking with a peer-to-peer lending situation. Lending Club has currently suspended new lender registration while managing some details of the process. These sites assess the credit, risks, and other factors making it a relatively safe option for both borrowers and lenders. Those interested in charity giving may find kiva.org a worthwhile cause as it allows you to lend money to small businesses and individuals in developing nations in a peer-to-peer context. The credit crunch in the banking industry, new lending phenomenon is apt to grow as more and more people look for options outside the traditional finance lending industry.
If you make a private loan or borrowing from a friend using peer to peer lending, family member or associate setting up acceptable loan terms is an important part of this process. Create a simple written agreement that specifies the amount of the loan, repayment terms, and interest. Include terms for default, bankruptcy and other financial circumstances. Should the loan be related to business costs, specify whether the loan is to the business or the individual. For a large dollar amount, you may even wish to consult an attorney regarding the loan agreement. For smaller loans, find tips on writing a family or peer lending agreement.
The current banking crisis may change how many of us borrow and lend money as more and more people opt to return to p2p financing options. New lending including peer-to-peer lending sites offer both a way to borrow money and a way to earn a bit of interest on your investment. Exploring online peer-to-peer lending is a newchoice both for borrowers and lenders, do your research about the corporations you choose.