What do you think about using peer to peer lending to fund a new venture? From my gathering, the loans appear to be smaller and perhaps easier to obtain than a traditional loan ("easier" if you are already familiar with the type you are borrowing from and have clear outlined goals). I've looked at a number of P2PL sites and the loans on these particular sites tend to range form $1k to $3k. It also seems easier to get a good personal loan this way. Has anyone recently tried this type of crowdlending for anything? What source did you use, and what is some of the best advice you can provide for obtaining peer lending? Also, what would be your advice for someone who may decide to become a lender. Any advice would be appreciated. Thanks!
Peer to peer lending... well yeah you can get small loans from there. What I don't understand is why you would feel like paying 15% interest when you can probably get a small loan like that from your own bank for less than 5%.
Peer to peer lending has enabled alot of people to escape the jaws of conventional banks. I know of one organization called Zidisha. Borrowers can sign up with them and create a profile on their platform and state the amount of interest they are willing to pay as well as the repayment schedule. When one repays to the lender, funds are transferred electronically to the borrowers account. Borrowers and lenders can communicate through the platform. Their interest rate of 8% is very low compared to most MFIs which charge 30-40%. Zidisha has no loan officers or physical infrastructure so they do a credit check with a local bank or MFI to assess your credit history.
The problem with a thing like Zidisha, if I understood the process completely, is that they it's a "pass or fail" and always 8%. Investors NEED to have loans of different interest rates, because risk and profit go hand in hand (ie. some of these loans are riskier than others) and the timeframe is different. (check out "yield curve")
I've lent through peer to peer lending, on a network called Zopa, but I have never borrowed through it. As an investment, it didn't have returns high enough for me to continue, which is the real problem: for peer-to-peer lending to give good returns to its lenders, it needs to have higher rates than most borrowers want to pay. If you are only looking for small amounts of funding, or have a product with niche appeal, you might be better going straight to traditional crowdfunding sources like Kickstarter, Gofundme, or Indiegogo where you aren't expected to pay interest. There are other peer-to-peer networks specifically for business, like funding circle, but I've never used them. On Funding Circle's page it advises that if you are just starting out you might do better with crowdfunding (normal limit around £100,000), while peer-to-peer lending works better for established businesses trying to grow (normal limit £1M).
We have that in the office the so called "paluwagan" where the members contribute money as a savings and to be lent to other members. Like a cooperative, the pooled money can be borrowed with interest but only for the members. At the end of the year, the contributed money plus the dividend earned from the loans are liquidated to the members. Come January, the cycle starts with the first contributions. The interest is minimal although higher than the banks. But the convenience of getting a loan cannot be compared since it is a quick way to borrow money.
