Anyone who’s ever lent a chunk of money to a relative or friend knows it can be a murky proposition fraught with sticky questions and daunting problems. If you have been trying to secure a loan and have been turned down by banks, you have an alternative.
You can borrow money from other individuals at competitive terms, and without having to put up any collateral to secure the loan. These loans are called peer-to-peer loans.
Peer to peer lending (or social lending) allows individuals to obtain a loan from other people who are willing to loan money. Enter the so-called peer-to-peer lending business, an emerging amphitheater of financial Web-sites that help arrange and manage loans between family members, friends and {as strange as it may sound} total strangers. Borrowers are turning to the sites as an attractive alternative to high-rate credit card loans, payday loans and other small unsecured loans that many banks won’t offer.
The sites all work a little differently, but were founded on a common principle of cutting out the middle man, which helps borrowers get a lower interest rate than they might through traditional sources such as a bank or credit card issuer. A lot better.
Lenders {basically anyone with a spare $50} are attracted by the prospect of earning higher returns than they may get elsewhere, such as in a bank CD.
At one site borrowers go through a credit check and get guidance about what to put in their listing, which must include their credit rating. For example, they may want to note any colleges they attended, which could sway a fellow alumnus to offer a better interest rate.
Lenders and borrowers are given market benchmarks to help them set and choose rates.
People can chose to lend to only the most highly rated borrowers and accept a lower interest rate, or make riskier loans to boost their returns.
There’s no limit on the amount someone can lend, but it is recommended to people to minimize risk by lending in $50 to $100 increments to a diversity of borrowers.
Instead of making money on the interest rate spread, the sites take their cut solely through fees for arranging and servicing the loan. Borrowers post how much money they’re seeking (from $1,000 to $25,000 usually) and the top interest rate they are willing to pay. Potential lenders bid to finance an entire loan, or more typically, pieces of loans. The bids with the lowest rates win.
One site collects an origination fee from the borrower ranging from 1 percent to 2 percent of the loan and an annual servicing fee from the lender of between 0.5 percent and 1 percent of the outstanding balance.
The company (site) collects and disburses monthly payments on the loans, which are all made for three years.
These loans are similar to signature loans or payday loans in that they are unsecured. But they differ and have three distinct advantages over those types of loans:
(1) You Avoid Banks – Peer to peer loans allow borrowers to bypass the banks by obtaining your loan from other individuals. Provided that the borrower’s credit score is satisfactory, they will likely be able to borrow money more easily through peer-to-peer lenders than from a bank.
(2) You get a Better Interest Rate – By avoiding banks and borrowing from a peer-to-peer lender, you will be able to obtain a loan at a lower interest rate. This is because social lenders have lower overhead costs than banks do. Lower overhead results in better terms for borrowers.
(3) A Three Year Repayment Schedule – Most peer-to-peer lenders schedule their loans with three-year repayment schedules. This means that your monthly loan payments are more affordable. Equally, most signature loans and payday loans have very short repayment schedules. Typically, those loans are due to be paid in full by your next payday. Longer repayment schedules take a lot of the pressure off of the borrower to repay the loan quickly.
Obtaining an unsecured loan via one of the peer-to-peer lending companies is an excellent alternative to traditional banks. You stand a better chance having your loan application accepted. You will likely get a loan at a lower interest rate. You will have ample time to repay the loan. Peer-to-peer loans are an excellent option for those people seeking an unsecured loan.
Now, why have I written a post on a Wednesday, and above all, why about all this? Hummm.
In today’s rapidly changing competitive environment, the most successful accounting firms are agile, adaptable, and capable of rapidly seizing new opportunities. I know you’ve heard of it: “The Learning Organization” — the kind of business that’s always learning… always improving… always achieving new milestones. Well I have come to a point.
I have come to a point in my practice where it is time to expand and grow accordingly. A business plan has been made. A perfect location has been found and is available. A working model has been established, and now is the perfect time. All cost have been established and verified. Employment for 16 accountants the first year and with expansion, over the next ten years up to 100.
I am however missing funding. So I am seeking out a silent partner or partners. I would utilize the means above, alas they fall short of the need funding to kick it all off. Calculations have been made for all construction, furniture, utilities, equipment, operating supplies, salaries, and the proverbial oddities necessary to maintain the tax, payroll and accounting firm.
So to you, perspective lender/s and/or silent partner/s. Provide the funding as described in the business plan. We build a strong growing firm and you get 6.5% interest on the loan payment. Also, as described by the sites above, a three year payment plan will be established. Monthly payments will be made accordingly to you over no more than thirty-six months. {Although preliminary estimates show that the total (All interest as well) would be re-paid in less than one year.}
So there is no mistake, this is a loan to a business, not an individual. The business is a new tax preparation and payroll service company. I will disclose no more than I feel I absolutely have to. Interested parties please contact me personally.
© 2010, Bruce Mc. All rights reserved.
