Peer to Peer Lending Recommendations

by Dual Income No Kids on July 16, 2009 · 0 comments

Hi All,

If you want to get into peer to peer lending, an interesting bloomberg article just came out today on the subject.

To add come context, here are our recommendations regarding peer to peer lenders.

1) Prosper.com

AVOID. Prosper doesn’t do as good a job managing their borrowers as other alternatives in the industry. We’ve lost a LOT of money on that website, mostly our fault, but prosper’s screening and debt collection policies didn’t help. Prosper has also recently made it harder to withdraw free cash from their accounts, which for us has a feeling of adding insult to injury. Bottom line: lots of deadbeats, management not customer centric.

2) LendingClub.com

INVESTIGATE. LendingClub has an interface thats not as user friendly as prosper.com. So, its harder to navigate around their webpage. This is a problem because you have to work at lending money relative to prosper. That said, LendingClub does a MUCH better job screening applicants for loans, so there are fewer deadbeats on their site. Since the ultimate goal is to make money via loans, this is of paramount importance. You can build your wealth through this service, and you should keep that in mind as your ultimate goal.

Also, LendingClub is much better about relationship management than prosper. LendingClub actually has people you can call and talk with, this doesn’t hurt when you work with an online business. In contrast, Prosper has a nasty habit of censoring criticism on their company managed user forums. Bottom line: better borrowers, better customer service.

3) Kiva.org

INVESTIGATE. Kiva is an on-line microlending/development outfit. They basically make small loans to people in developing countries who don’t have access to capital. We haven’t done a lot of lending via Kiva, but the thing is, they do not pay interest, you only get your capital returned. Since the point of lending is to make money from charging other people to use your money, Kiva is disadvantaged. However, if you do believe that the best way to help others is by empowering them economically, then you will love Kiva. Kiva also interviews and trains their borrowers so one can be relative confident the borrowers will repay their funds. Bottom line: look into Kiva, but only for charity.

Here is the link to the Bloomberg article.

Best,

James

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