Percentage in Point

Posted: 08 Aug 2010 08:58 PM PDT

If you are someone who is afraid of the stock market and yet want to have a profitable percent to your money, then you should be looking at peer to peer lending, or also generally known as the Lending Club. This may sound very new to you, so, I'll make sure you know what exactly this is, from the very basics.

What Exactly Is Peer to Peer Lending?

This is a relatively new concept and not many people are aware of it, as a lending club or peer to peer lending is not existent or even allowable in all the various US states. Therefore, any time you want to get into this make sure you call the representatives of the lending club and get yourself some good information. Here is what I found out about peer to peer lending.

The lending club is an online financial club that consists of borrowers and investors. A borrower would join the club, fill an application for getting a loan with a determined interest rate. Once the online application is approved, the borrower is given a loan amount with a fixed interest rate by the investors. The investors then collect the interest and in this way is investing in the loan amount.

The Downside

One of potential downsides to this business is the borrower's default. If the borrower defaults on the payment, then your left helpless.

Therefore it is very critical to choose the right kind of borrower for funding a loan. Remember that the higher the return, the riskier the situation. So you must be very careful on how you actually fund a loan, which would not leave you helpless and frustrated.

How Can You Be An Investor

Ok! being a borrower is easy, you just have to fill the form and that's about it. Being an investor is a little different. First of all, you have to determine what is your lending potential and how much do you want to invest in. With a lending club, you can handle as many borrowers as you want, as the club takes only $25 for each borrower. Therefore the more cash you have, the more borrowers you can get to.

Opening The Account

Opening an account at the Lending Club is an easy procedure. All you have to do is log on, fill a form, provide basic information and once the account is verified, you start the funding process. To give in the money, you can use your the check, online payment services, credit cards and an existing IRA. All you have to do is give in the initial payment charges based on how many borrowers you want to fund (@$25/borrower).

The Process of Lending

Now that your registered with your funds and all, you will first of all start building your portfolio. Remember that a strong portfolio will give you a number of advantages and could give you atleast 10.62% funding benefits. There are two kinds of portfolios, the conservative one and the aggressive one. If you are new to this network, it is suggested, you opt for the conservative one.

Whatever portfolio you choose, the lending system prepares a list of potential borrowers and you get an approximate 8.49% return on your money, after the service charges etc are deducted. With the conservative portfolio, one gets various categories of loans with A,B,C being the least risky loans and a D with being a risk factor.

Easy Information

When borrowers apply, their portfolio is built too and you do not even need to ask any other question, as all the information is given in the portfolio. The GROSS INCOME, LENGTH OF EMPLOYMENT, LOCATION, HOME OWNERSHIP, CURRENT EMPLOYER, CREDIT SCORE RANGE, EARLIES CREDIT LINE….and nearly every thing else related to financial records is set out in the portfolio, which makes it very easy for an investor to consider.

Important Points

You need only a minimum $25 investment for opening investing account.
Lending Club contacts borrowers incase of late payments.
Borrowers receive funding within 24 hours of listing.
The default rate on Lending Club loans is as low as 3%.
Borrowing funds limit for a borrower is around $25,000.

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