Thoughts on Peer-to-Peer Lending?

Great, thank you FB.

I will try better search words.

Dumb arse idea. Invest in unsecured loans, with no legal recourse if borrower defaults, and give 1% of principal and gain to P2P company.

Nah, I'll buy bitcoins before doing this shite.

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Dumb arse idea. Invest in unsecured loans, with no legal recourse if borrower defaults,

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Not at all. Just another investment vehicle. That is why you can choose who you lend to(check credit rating) and how much. credit rating determines interest rate. Not hard at all to make this work if you do your due diligence like with any investment. No problems at all with defaults breaking me or some such "popular" nonsense.

I agree though it is better to lend private money which is secured by RE. again though not all investment vehicles are for everybody. I like a little of everything though.

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Isn't that pretty similar to the way all house loans work? Banks give out unsecured loans

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Home loans are secured by the home as collateral.

Here's my thing about P to P lending ... why is the borrower doing this instead of going through "regular" channels? I don't see the point of doing so unless there's some factor in play that is not good for the lender.

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Someone who is a good risk can easily borrow from a bank. For sizable amounts it might be a personal loan, for something less significant anyone with a good FICO can get 0% APR for 12-15 months with any major credit card issuer.

So the major question to answer is why is the borrower not doing this? And for the amounts typically involved it isn't worth it to spend the time trying to find out.

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The only "legit" reason I can think of is the borrow doesn't want to mess up their DTI. If I recall, these P2P sites don't report unless you default.

Of course, that would mean that you're lending to a historically "good" borrower who is over-leveraging for some still unknown reason.

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The only "legit" reason I can think of is the borrow doesn't want to mess up their DTI.

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The size of most of the offers out there wouldn't mess up DTI unless the income is damn small to start with.

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So the major question to answer is why is the borrower not doing this? And for the amounts typically involved it isn't worth it to spend the time trying to find out.

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I have a friend who borrowed from a prosper loan, it was something like $3500 @ 20% APR. I could have kicked the living shite out of him. I decided to buy out his note because the interest would keep him making payments for years. I bought the remainder of his balance at 3% ( So I could secure the loan with a legal Promissory note). I've known the guy for 20 years or I wouldn't have done it.


His reason: he couldn't get a loan conventionally. I suspect that is the reason for majority of the prosper borrowers.

So the question is, if a bank, who is a billion dollar company has deemed someone unworthy of a loan, why should I trust that person? I'm reminded of one of my heroes, J.P. Morgan:

As he testified before a House committee that was investigating his economic dominance over America, J.P. Morgan was asked whether commercial credit was based more on money or property. Morgan replied, “The first thing is character…before money or anything else. Money cannot buy it, and a man I do not trust could not get money from me on all bonds in Christendom"

“Money equals business which equals power, all of which come from character and trust,”

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why is the borrower doing this instead of going through "regular" channels?

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Exactly....there is a reason this person has to go this route...and it ain't b/c he has plenty of viable options.

My advice is if you have enough money laying around to lend b/c of the success from a trade and/or business....stick to making money in that field and stay out of the lending business.

I lol when they say there's no fee for paying back early. Hell, they'd be shocked to get full repayment of principal with that clientele.