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Posts Tagged ‘finance

Borrowing Money Made Easy

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                                                                                                                                                                                                         A Picture of Money Arranged                                        I learned this lesson from my uncle.  He said, “Only borrow money to make money”. Okay you’ve decided you need to borrow money and it is to make money, but you have limited resources from which to draw. You’re in business for yourself and you need to push your business to the next level. For any number of reasons you don’t want to borrow from your home bank now. You refuse to do the unthinkable and tap your IRA or 401K.  Too, asking friends and associates is out of the question. Many of us have come to this financial juncture before. No matter your situation there is a viable solution for you. Fortunately, there’s a new kid in the lending market that is very unique. It is called peer-to-peer lending. Peer-to-peer lending is not simply a new concept in borrowing money: it trounces the old traditional ways of obtaining loans. Peer-to-peer lending has many advantages for both borrower and lender. Its principle being founded upon the community sharing concept.            

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What is Peer-to-Peer Lending? Peer-to-peer lending  is a community of investors and lenders as an aggregate entity. The community serves two main purposes, to make money for investors and to lend money to borrowers. You can enter the community as a lender or a borrower. It is your choice. Some of the advantages of peer-to-peer lending for the borrower compared to conventional bank loan are 1) the borrowing requirements are less stringent 2) interest rates are much lower 3) normally the type of loan determines the interest rate; personal loans being the highest 3a) with peer-to-peer lending personal loan rates are as low as 7.5% instead of  the industry minimum of 16%! 4) risk is spread over a very large community of investors consisting of hundreds of thousands of members, which greatly increases your chances of getting approved 5) you’re not just a number; you get to add a personal element to your cause through your story-every investor wants to understand the applicant and why the loan is needed 6) your loan can be in your bank account quickly, within a matter of days. 

To apply for a loan you post your request to the community stating why you need the loan and how you intend to repay it. Here’s the important part: be honest, clear and concise in stating why you need the loan. Also it is important to add the human element here. The more transparent you are, the more likely you are to get the loan.  The community favors honesty and  loan requests that are for a good purpose. Many borrowers post a picture of themselves-often in their home, work or school environment.  This helps investors to feel they are part of your quest. Once a young law student posted a tuition loan request and told how he needed the loan to finish his last year in graduate school. He spoke briefly of the trials and tribulations he had faced-how he was at the end of the road-he just needed the final push. His was a heart-rending story. He included a picture of himself in cap and gown walking to receive his baccalaureate diploma. His picture was the stake through the heart. Needless to say he got his loan in less than a day. So be honest. You want the investors to believe in you and your purpose, just as much as you do. 

Prepare Before Applying: With peer-to-peer lending the stories are the most interesting part. Many are engaging, and from an investor viewpoint, it is fun looking over the stories and determining which requests to invest in. It is a good idea if you look at other requests to get a feel for what you need to do. As you read the stories you will get an understanding of how investors will view you too! Here are a few more tips on how to get ready. 

Pictures: Choose pictures that: 1) are clear with good detail, not blurry 2) connect with your situation 3) that demonstrate your story and show you in the prospective environment, albeit, your home, college, work or business (for example, a home improvement loan: show yourself working in your home, a business loan: show yourself opening or working your store, a home addition loan: show the family!)

Write Your Draft: Draft your statement before applying. You should have on hand any financial documents you may need to refer to such tax documents, your business plan, the actual bill you would like to fund, your credit report and any financial statements 

About Your Personal Information: Finally, investors pledge either a portion (as low as $25.00) or even all your loan request. Of course the investors wants to know how you are going to repay the loan. So you have to divulge financial information but sensitive data such as your social security number, home address, place of employment, account numbers, telephone number and such is kept secret from the community and is only known by the on-line banking house. 

How Much Can I Borrow? You can request a loan up to $25,000. When you repay, you send in one payment and it is distributed by the on-line banking house to the investors. You are given up to three years for repayment. Some of the resources for peer-to-peer lending are prosper.com, kiva and lendingclub

A Final Word… It is refreshing to see a new financial vehicle via peer-to-peer lending. Peer-to-peer lending is a God-send for the average Joe. Take for instance, small businesses that need more capital, college students who need educational loans and the general consumer who is in need of a home improvement loan or personal loan, in peer-to-peer lending these applicants have found an unmatched invaluable resource. Because of its inherent nature of a “friend-to-friend” transaction that addresses the very needs of the small man, I envision peer-to-peer lending will grow to cover a major part of the micro loan market in the near future. Only time will tell. In the interim, many applicants who need a deserving break will benefit.

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