Many people assume there is only one source of borrowing. This source would, of course, be a traditional bank. While banks truly are a major source of lending, there are other opportunities for borrowing. One such method would be peer-to-peer lending. Among the common peer-to-peer lenders, Prosper remains an increasing popular provider.
Prosper Loans (Prosper.com) is a company that also does offer something unique to the financial market. It provides a means in which investors can a nontraditional and potentially profitable vehicle for their money. How so? Investors become lenders and reap the interest on the financing they provide.
The numbers tell the tale. There are over 1.1 million members and they have borrowed $264 million in funds. Such figures clearly show that this is a well established and serious lender. How does the program designed by Prosper work? The answer to this is found in the answer to what exactly peer-to-peer lending entails.
Basically, the process eliminates the traditional lending institution by connecting borrowers with those that are looking for viable vehicles in which to invest their money. New and innovative investment vehicles will always be popular which is why this company is raising eyebrows in financial circles.
The actual borrowing/lending/investing process is a rather streamlined one. A borrower merely needs to determine a loan amount along with a stated purpose for the loan. Immediately thereafter, the borrower will post a classified ad promoting a loan listing. Those interested in investing via funding loans will examine the classified listing.
Investors are not under any obligation to cover any loan. However, if the investor sees a loan listing that meets his or her risk level, the investor may wish to fund such a loan. Again, there is no obligation for the lender to accept a loan offer so no one is locked into funding weak loan offers.
As soon as a loan is approved, the borrower will make repayments in the same manner they would to any other lending source. They will make fixed monthly payments which will go to cover the loan and the interest.
The money that is paid back will cover both the investor's actual investment although a portion of the payments will go to Prosper.com. This should be considered a given because the service does have to make money in order for it to remain solvent. That is just basic common business sense. This is where certain misconceptions arise where the service is dubbed fraudulent. Accepting fees for providing a lending and investing service is perfectly understandable. The key here is that the service does what is needed to do to provide all parties with a viable means of seeing both their needs met. Accepting a nominal fee in order to provide such a service is logical.
Prosper.com does offer a unique peer-to-peer lending and investing service which can help all parties involved. Many are seeking a viable means of acquiring lending when other forms of lending have been cut off. The same can be said that there is a need for effective investment vehicles as well.