As the global credit squeeze leads banks to tighten their lending, a niche industry is emerging as the eBay of consumer loans: peer-to-peer lenders.
With peer-to-peer lending, individuals, some of them with little or no collateral, seek loans from ordinary people looking to lend. Lenders compete with each other to make loans, often resulting in lower rates for borrowers -- averaging 10 percent to 16 percent -- than are available on unsecured bank loans.
Typical loan amounts range from $8,000 to $20,000; on some sites, multiple lenders may fund a loan, each offering to lend $25 to $200 to a borrower.
The market for the loans is still relatively small but growing fast, according to Celent, a research firm. Celent projects that $5.8 billion in peer-to-peer loans will be made in the U.S. by 2010, an 800 percent leap from the amount this year.
Lenders on the sites usually decide whether to lend money to a particular borrower -- and at what rate -- based on the borrower's credit score and existing debt. Yet unlike with a bank or credit card loan, the decision is sometimes based on social factors, too: how compelling the borrower's reason is for a loan or whether he or she shares hobbies with the lender, says Christine Barry of Aite Group, a consulting firm.
"When you're dealing with a large financial institution, it may be difficult to tell your story and get people to understand," says Douglas Dolton, CEO of Zopa, one of the peer-to-peer lenders.
The more established players -- such as Prosper and CircleLending, which sold a majority stake in the company and rebranded itself Virgin Money US this year -- dominate the business. But more rivals are entering the industry at a time when even people with good credit are finding it harder and costlier to borrow from traditional sources.
In December, Zopa opened up shop in the U.S. Also this month, Lending Club, which began as a service for Facebook members, expanded nationwide.
"It seems that the credit crunch is accelerating our growth," says Renaud Laplanche, CEO of Lending Club.
Peer-to-peer sites profit not from a loan's interest rate but from fees they charge borrowers and lenders to make and service the loan. They also check borrowers' credit and contract with third parties to collect on bad loans.
Default rates are lower for peer-to-peer loans than for other consumer loans.
source:http://www.delawareonline.com/apps/pbcs.dll/article?AID=/20071231/BUSINESS/712310322/1003
Monday, December 31, 2007
Friday, December 28, 2007
Least risk loan options
Financial deficits are part and parcel of life. The economics of life sets numerous examples of this fact. Every person at certain juncture of life has encountered monetary deficits. Even the billionaires of the globe are not exceptions. The right lessons can teach us to take these deficits easily, which can make life smooth and tension free.
How to keep calm during the financial constraints, even if you are risk averse? You can take loans for any legally correct purpose and find means to meet your needs. Financial market in the UK is now offering loans for all purposes. Hence, you need not to be worried when stalked by tough situations related to finance.
Unsecured loans are the loans available for any purpose without a residential property security. The word unsecured means absence of security from the borrower’s side. The lenders of these loans do not demand for security. Hence, the borrower is at the safer end. There is no repossession issue in case of default related to these loans. Therefore these loans are also called the risk-free loans.
Unsecured loans are specially designed for students tenants and self-employed professionals who find difficulty to avail the loans against residential property security.
The spending pattern of the loan amount depends upon the will of the borrower. However, it should be legally correct. The amount you can borrow depends upon your credit rating. If you have a fair credit score, you can avail a maximum amount of 25,000 pounds.
E-lending has made unsecured loans hassle free. You can fill loan application form on the Internet. You have to offer other required documents with the application form. Then the processing begins at the lender's end. As there is no requirement of property evaluation, the processing takes less time. Hence, apply for the loans today and fulfill your requirements without any obstacle.
Source:http://www.bestsyndication.com/?q=122307_least_risk_loans.htm
Unsecured Loans – Finance Your Business Projects
Everyone wants to maximize returns on investments. If you have sharp business acumen and your investment decisions are right, success is bound to come sooner or later. Business fluctuations are very much intrinsic to the nature of activities involved in it. If you are receiving good returns from the business, you can create reserves to be used in future business projects. However, if you do not have any reserve and a big business order is awarded to you, the only solution that you are left with is to borrow money from the market.
A businessman can borrow against the goodwill of his business. The past records show that how regular you have been in repayments. There are two ways to raise credit from the open market. You can pledge your assets like business premises or stock and obtain loan from lenders.
It is, however, a risky proposition and your business goodwill may receive a setback from the market. The other way is to obtain unsecured loans from the lenders. This can be done without involving any business assets in the loan transaction and is a safer way of borrowing money.
Lenders provide unsecured loans to the business houses as well as for your personal use. The loan amount differs in both the cases. Businessmen generally have larger financial requirements; whereas a common man would apply for limited loan amount only. Businessmen can use unsecured loans to expand their businesses or to recover from a bad financial phase.
Unsecured personal loans are used by the consumers for various reasons like purchasing a car, going on holidays, education, home improvement, etc. All types of unsecured loans are available on the internet. These loans are quickly available as they do not require any security. However, a bad credit rating may create problems in obtaining such loans. Lenders normally ignore one or two minor delays in repayment but if your record is consistently bad then you might have to apply with sub-prime lenders who specially deal with people having bad credit.
Source:http://www.bestsyndication.com/?q=122307_unsecured_loans.htm
A businessman can borrow against the goodwill of his business. The past records show that how regular you have been in repayments. There are two ways to raise credit from the open market. You can pledge your assets like business premises or stock and obtain loan from lenders.
It is, however, a risky proposition and your business goodwill may receive a setback from the market. The other way is to obtain unsecured loans from the lenders. This can be done without involving any business assets in the loan transaction and is a safer way of borrowing money.
Lenders provide unsecured loans to the business houses as well as for your personal use. The loan amount differs in both the cases. Businessmen generally have larger financial requirements; whereas a common man would apply for limited loan amount only. Businessmen can use unsecured loans to expand their businesses or to recover from a bad financial phase.
Unsecured personal loans are used by the consumers for various reasons like purchasing a car, going on holidays, education, home improvement, etc. All types of unsecured loans are available on the internet. These loans are quickly available as they do not require any security. However, a bad credit rating may create problems in obtaining such loans. Lenders normally ignore one or two minor delays in repayment but if your record is consistently bad then you might have to apply with sub-prime lenders who specially deal with people having bad credit.
Source:http://www.bestsyndication.com/?q=122307_unsecured_loans.htm
Up Your Chances Of Getting A Loan
The best unsecured personal loans are offered to those with excellent credit records only. So anyone with a tarnished history must consider making 'tactical applications'.
I mentioned this idea once before, in an article with seven tips in it. Unaccountably, I called it Six Great Tips For Getting A Personal Loan. As I'm a personal finance writer who appears to be unable to count, I guess it's lucky that this idea is quite simple.
It's been just four months since I first suggested this, yet in that short time it has become even more relevant. It's got significantly harder to take out a loan. Being realistic, most borrowers won't get the best interest rates, which are currently around 6.5% APR to 7% APR. So people who have missed payments, had a CCJ, or have borrowed too much or too little*, will have to set their sights a bit lower to increase their chances of a successful application.
What you shouldn't do in this situation is simply try your luck on the cheapest loan first. The odds of you getting it are very low to non-existent, and it'll cause problems. Firstly, you'll feel disheartened. Secondly, you'll be miffed. Thirdly, you'll have delayed getting a loan. Fourthly, and most importantly, it'll add a mark to your credit record; the more applications you make for loans and credit cards, the worse your record looks.
To that end, I've made a table that will hopefully help you choose a loan you're more likely to get:
Missed payments Suggested interest rate you go for1 in the past year and none in the past 3 monthsAround 8% APR2 in the past year and none in the past 3 monthsAround 9% APR2 in the past year and 1 in the past 3 months, or 2 each year for the past 2 yearsAround 10% APR I can't cover every single scenario, but hopefully you can see roughly where you fit in and make a judgement call.
If you've missed two payments in the past three months or three or more in the past year, or if you have a CCJ on your record or some other mark that's worse than a missed payment, I don't think you should try to get a loan without first getting someone else to take a proper look at your finances. I also don't think that anyone should be applying for loans over, say, 10% APR (at today's interest rates, anyway) without first checking if there are better options, because there's a good chance that there is.
My recommendations are educated, rough estimates of what you might be able to get. You're not guaranteed to get them. Each lender has different criteria, which they keep to themselves. This means that one lender offering 8% APR might accept your application whilst another doesn't. Even if you have what you think is a perfect record, a lender might not find that you fit the profile it's looking for.
More tips
To help you get the right loan, here are some extra tips:
Check the TAR as well as the APR
Remember that the Annual Percentage Rate (APR) is just a rough guide to how cheap a loan is, because it can be manipulated. A loan offering 8.5% APR could actually be more expensive than another loan offering 9% APR. Therefore, you can't just use the APR. You should also find out what the 'total amount repayable' (TAR) is. This is the total cost, including interest and charges, that you'll pay by the time the loan is cleared.
To compare loans using the TAR with The Fool's search engine, click 'View Unsecured Loans' and then click on 'Total Amount Repayable' at the top of the results table to sort by that column, rather than by APR. This way, you know the cheapest loan will be listed first.
Look (Frankfurt: 867225 - news) for additional benefits
Taking a loan with a higher interest rate may play into your hands in the long run, because they can offer you additional benefits. Look for loans that have no early-repayment charges and that allow you to make overpayments. When you have extra cash, you can use it to pay off the loan earlier, which reduces the interest you pay.
Find those hidden tickboxes
If a lender rejects your application you might, shortly after, receive a call, letter or email from another company, offering you a secured loan. Do NOT take out this loan. You can avoid this 'offer' altogether by ticking (or unticking) the appropriate box in the application form, which forbids the lender from passing your details to other companies. These boxes can be very well hidden, so be thorough. (As you always should be when reading small print.) It'll be there somewhere!
Consider alternatives to loans
Finally, I said earlier that people with poor credit records should seek guidance before taking out a loan. However, if you have any debts it's always worth asking for more opinions, because there could easily be a better option for you. It's amazing how many options we have, actually.
You can read our guidance, How To Get Out Of Debt, and you can get tailored advice anonymously from the debtors, former debtors and debt experts in our friendly Dealing with Debt community.
If you've hardly borrowed anything, you'll find it harder to get the cheapest credit, because the lender has no history to see how reliable you are at repaying. Lots of things can affect your rating; read Why You Can't Get Credit for more.
Source:http://uk.biz.yahoo.com/19122007/35/chances-loan.html
I mentioned this idea once before, in an article with seven tips in it. Unaccountably, I called it Six Great Tips For Getting A Personal Loan. As I'm a personal finance writer who appears to be unable to count, I guess it's lucky that this idea is quite simple.
It's been just four months since I first suggested this, yet in that short time it has become even more relevant. It's got significantly harder to take out a loan. Being realistic, most borrowers won't get the best interest rates, which are currently around 6.5% APR to 7% APR. So people who have missed payments, had a CCJ, or have borrowed too much or too little*, will have to set their sights a bit lower to increase their chances of a successful application.
What you shouldn't do in this situation is simply try your luck on the cheapest loan first. The odds of you getting it are very low to non-existent, and it'll cause problems. Firstly, you'll feel disheartened. Secondly, you'll be miffed. Thirdly, you'll have delayed getting a loan. Fourthly, and most importantly, it'll add a mark to your credit record; the more applications you make for loans and credit cards, the worse your record looks.
To that end, I've made a table that will hopefully help you choose a loan you're more likely to get:
Missed payments Suggested interest rate you go for1 in the past year and none in the past 3 monthsAround 8% APR2 in the past year and none in the past 3 monthsAround 9% APR2 in the past year and 1 in the past 3 months, or 2 each year for the past 2 yearsAround 10% APR I can't cover every single scenario, but hopefully you can see roughly where you fit in and make a judgement call.
If you've missed two payments in the past three months or three or more in the past year, or if you have a CCJ on your record or some other mark that's worse than a missed payment, I don't think you should try to get a loan without first getting someone else to take a proper look at your finances. I also don't think that anyone should be applying for loans over, say, 10% APR (at today's interest rates, anyway) without first checking if there are better options, because there's a good chance that there is.
My recommendations are educated, rough estimates of what you might be able to get. You're not guaranteed to get them. Each lender has different criteria, which they keep to themselves. This means that one lender offering 8% APR might accept your application whilst another doesn't. Even if you have what you think is a perfect record, a lender might not find that you fit the profile it's looking for.
More tips
To help you get the right loan, here are some extra tips:
Check the TAR as well as the APR
Remember that the Annual Percentage Rate (APR) is just a rough guide to how cheap a loan is, because it can be manipulated. A loan offering 8.5% APR could actually be more expensive than another loan offering 9% APR. Therefore, you can't just use the APR. You should also find out what the 'total amount repayable' (TAR) is. This is the total cost, including interest and charges, that you'll pay by the time the loan is cleared.
To compare loans using the TAR with The Fool's search engine, click 'View Unsecured Loans' and then click on 'Total Amount Repayable' at the top of the results table to sort by that column, rather than by APR. This way, you know the cheapest loan will be listed first.
Look (Frankfurt: 867225 - news) for additional benefits
Taking a loan with a higher interest rate may play into your hands in the long run, because they can offer you additional benefits. Look for loans that have no early-repayment charges and that allow you to make overpayments. When you have extra cash, you can use it to pay off the loan earlier, which reduces the interest you pay.
Find those hidden tickboxes
If a lender rejects your application you might, shortly after, receive a call, letter or email from another company, offering you a secured loan. Do NOT take out this loan. You can avoid this 'offer' altogether by ticking (or unticking) the appropriate box in the application form, which forbids the lender from passing your details to other companies. These boxes can be very well hidden, so be thorough. (As you always should be when reading small print.) It'll be there somewhere!
Consider alternatives to loans
Finally, I said earlier that people with poor credit records should seek guidance before taking out a loan. However, if you have any debts it's always worth asking for more opinions, because there could easily be a better option for you. It's amazing how many options we have, actually.
You can read our guidance, How To Get Out Of Debt, and you can get tailored advice anonymously from the debtors, former debtors and debt experts in our friendly Dealing with Debt community.
If you've hardly borrowed anything, you'll find it harder to get the cheapest credit, because the lender has no history to see how reliable you are at repaying. Lots of things can affect your rating; read Why You Can't Get Credit for more.
Source:http://uk.biz.yahoo.com/19122007/35/chances-loan.html
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