Recent data made available by Lending Club and Prosper Marketplace indicate that the vast majority of its borrowers take out unsecured loans from the two companies’ peer-to-peer lending marketplaces for debt consolidation. There’s good reason for this too the rates offered to borrowers by Lending Club and Prosper marketplace are far more competitive than what borrowers would be able to get with a debt consolidation loan, credit cards, or any form of other unsecured loan.
Many borrowers that want to consolidate their debt make use of home equity lines of credit or home equity loans. In doing so, they put up their house as collateral and get a better interest rate as a result. The reality is that you probably shouldn’t take this deal, even though you’ll be able to get better rates than any unsecured loans, because you’re now enabling the company to lend you money to foreclose on your home if you can’t make your payment. With an unsecured loan, the bank or financial company can call, kick, and scream, but they can’t take away your home.
If you are looking at getting an unsecured loan, the rates that Lending Club and Prosper Marketplace offer are far better than what you’ll be able to get for an unsecured loan at just about any bank or credit union. According to BankRate’s most recent data, the average interest rate that balance-transfer credit cards are offering is 14.83%. Compare this to Lending Club’s average of about 9.5%.
Loans from Lending Club and Prosper Marketplace are a steal compared to what you can get elsewhere. The major reason for this is that there are no banks involved. Banks have to tack on a large amount of interest onto the true cost of a loan to pay for their operating costs. With peer-to-peer loans, you are borrowing directly from individuals, so that massive overhead simply isn’t there.
The loans that you can get from Lending Club and Prosper Marketplace are very comparable to what you would be able to get in a debt consolidation program or from a personal loan for a bank, except that the interest rate is much lower. The loans amortize fully over a 3 year term and payment is made via automatic transfer. The application process is all online and is also relatively straight forward as well. Just head on over to either company’s homepage and follow their sign-ups to apply for a loan.
Both Prosper and Lending Club offer an interesting alternative investment to investors looking to diversify their portfolio. Some have put 5-10% of their money into investing in peer-to-peer loans as a way to get a great rate of return and diversify their portfolio. Some investors that managed their portfolios carefully have been earning 10-15% on their funds through the recession. If you have some extra investment money laying around, Lending Club might be worth checking out.
