Social lending has become very popular. The economy has been suffering so much that most banks will not lend money to every day Americans. Americans are turning to social lending because this form of lending is much easier than borrowing money from banking institutions.
Websites such as prosper.com, virgin money, and lendingclub.com allow borrowers to get a loan from other people instead of banks or other lending institutions. The way that prosper.com works is that you write a brief summary that includes how much money you need to borrow and the highest interest rate you can afford. The lenders bid on your loan and after the bidding is over the loan money is given to you. There are fees and interest rates involved. Prosper.com charges a closing fee and the monthly payments are automatically withdrawn from your bank account.
Social lending is great for the economy. Most people are borrowing money to pay off debts, start businesses, repair their home, or get a car. The economy needs a shot in the arm. If people are not borrowing money from credit card companies and banks then our banks and credit card companies are less likely to fail due to the growing amount of delinquent credit card accounts. It also helps keeps to keep families financially stable so that they can survive through these rough economic times.
Social lending and peer to peer lending can have their down side though. Everyone knows that if you lend money to a friend or family member then you are not likely to every get your money back - but not necessarily if you put everything in writing. If you do lend out your money through web sites like prosper.com, it takes a while to recoup your investment and make a profit. If in the mean time you have a family or financial emergency then you can end up being in dire straits financially. Social lending is a very innovative thing. It benefits the lenders and the borrowers and helps to repair the economy at the same time.