There is a marketplace for matching people who need money with people who wish to lend it. The key phrase is: people who wish to lend it; this does NOT mean banks. Peer-to-peer lending is just that. Prosper.com is a great example of a clearinghouse where "investors," or people who wish to invest their money by lending to others, are matched with borrowers. Everyone comes out ahead; the borrower usually pays a lower interest rate than if they borrowed from a bank, and the lender, or investor, receives a higher rate of return than if their money were in a savings account or CD.
Research has found if you borrow through peer-to-peer lending there are a couple of strategies you can use to better your chances of receiving the loan.
Come Clean With Your Financial Horrors
Rice University and the University of Delaware found that honesty goes far. If you were to say on the loan application that you "need to get back on track," the lender will love it. As a matter of fact, those that made statements to this effect received their loan in 65.3% of the cases, as opposed to only 45.8% when a statement as this was not included.
Tell The Lender You're Trustworthy
Research from the aforementioned Prosper.com categorized applications into six identities:
- Economic hardship
Those who said they were trustworthy received loans that were 30% cheaper, thereby saving $375 in interest charges over the life of the loan. This will make it much easier to pay the loan back.
Having a good image and being open and polite will carry you far not only in receiving a peer-to-peer loan, but will go a long way in many other facets of your life.
Would you consider borrowing on a peer-to-peer basis?