Personal Loans and Social Lending Sites |

As social networking increasingly becomes our way of connecting with others, it is only natural that this online world of relationships crosses over to the world of finance and personal loans. On sites like Facebook people have thousands of friends from around the globe, and have virtual memberships in organizations and businesses that promote a common cause. We can feel closer to a face on a social networking site than we do to members of our own family or even next door neighbors. Is it any wonder that there are progressively more people also turning to online worlds to both borrow and lend money?

Person-to person lending (P2P) is taking file sharing to a whole new level on the internet. As credit restrictions tighten, unemployment rises, individuals are finding themselves in need of personal loans and unable to obtain them through traditional and conventional avenues. That’s where social lending sites come in. Borrowers can set up profiles listing both their monetary needs and their credit worthiness. Investors or lenders in turn can “shop” for borrowers and assume whatever risk and return they choose. For some investors this type of lending is more appealing than an uncertain stock market or dismal low-interest savings accounts. For borrowers this can be a better alternative than family members or payday lenders. Social lending sites can provide an avenue for potential borrowers to tell the story behind the need for a personal loan, and some believe that this creates a more humane lending environment. Sometimes we are more than our credit scores, and P2P lending, lets borrowers explain their situation to those who choose to listen.

Many internet lending sites provide a forum for borrowers and lenders to create promissory notes, track payments, and provide feedback on each other that will help (or hinder) them in future financial transactions with other members. A sort of EBay for personal loans, social lending is a creative alternative and option to a slow and tight credit market in the mainstream economy. The average rate of return on social lending sites is approximately 9% and many lenders like this number for short term personal loans. There is risk of course, and not every social lending site is the same. Like with any financial transaction, do your research and ask questions regarding any personal loan commitment. Social lending is lending with a personal touch, but it is still a business and should be undertaken with caution by both the lender and the borrower.

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