Peer-to-Peer Lending

What is Peer to Peer Lending?

Peer-to-peer lending, also known as social network lending, allows borrower members to borrow money through personal loans, and lenders fund these loans by investing in notes. Each note corresponds to a portion of a borrower’s loan.

With the combined forces of a contracting credit market and the power of the internet, peer-to-peer lending has gained a lot of momentum. It has proven to be an effective alternative to conventional bank lending and has filled some of the void left by many of the larger banks and lenders.

The Lenders and Borrowers

Lenders are simply private individuals who sign-up to invest in qualified member borrowers. Borrowers with good credit can get personal loans at interest rates they find more attractive than those available from conventional funding sources such as banks and credit cards. Their online platform provides a streamlined process between the source of funds (lenders) and the borrowers who need those funds.

Lenders get an opportunity to fund specific borrowers by investing in notes issued by LendingClub that correspond to specific borrower loans. The stated interest rates on notes range from 6.69% to 19.37% (after deduction of the 1.00% service charge).

Approved borrowers can then list their loan request on the site, at the interest rate they qualify for. There is a two-week loan listing period during which lenders can review loan listings and decide to fund the borrowers. If a loan is not fully funded at the end of the two-week period, the borrower can decide to accept partial funding or relist the loan for another two-week period. Most loan requests receive full funding.


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