What Is Peer-to-Peer Lending?

Written By Jeff Hindenach
Last updated November 25, 2019

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September 3, 2015

Simple. Thrifty. Living.

With traditional investing, the terms and payouts can be confusing to someone who is not well-versed in all the laws and rules that go along with it. Plus, big banks have a huge interest in where you are investing and if they are getting their cut. This can be frustrating.

This is why simpler investing options are starting to pop up, including peer-to-peer lending. This allows for a more straight-forward investing that not only gives you a simple return on your investment, but helps out others who need loans.

Peer-to-peer lending is when everyday people invest in loans to other everyday people. How does it work? If you are looking to invest, you go to a peer-to-peer lending site and sign up. They will do a background check on you and your finances and either approve or reject you. If you are approved, you can invest your money in a fund that will then be lent out to people who apply for loans with the site. And you get to choose which loans you want to invest in, which is the best part of the sites. So instead of applying for a loan from a bank, they apply through this site and your money funds their loan. This also means that you get a large portion of the interest that those clients are charged. It’s straightforward and simple, which makes it a more attractive way to invest.

Prosper: Prosper is one of the most respected and largest peer-to-peer lending sites out there, with over 1,240,000 members and $500,000,000 in loans funded to date. That also means that Prosper has higher returns than other peer-to-peer lending companies, with a range from 6.41% to 10.57%.

Lending Club: Lending Club has a very strict loan policy, which means only about 10% of loan applicants actually get approved. That means that only the best lenders are approved, but it also cuts down on the amount of funding they need for loans. Returns on your investment range from 5.57% to 9.16% at Lending Club.

About the Author

Jeff Hindenach

Jeff Hindenach is the co-founder of Simple. Thrifty. Living. He graduated from Bowling Green State University with a Bachelor's Degree in Journalism. He has a long history of financial journalism, with a background writing for newspapers such as the San Jose Mercury News and San Francisco Examiner, as well as writing on personal finance for The Huffington Post, New York Times, Business Insider, CNBC, Newsday and The Street. He believes in giving readers the tools they need to get out of debt.

  • Thanks so much for the blog article.Much thanks again. Really Great.

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