I am a savings-account kind of guy. I like knowing how much interest my own money is earning, and how much I can depend on each and every month from my accounts. ING has been very good to me over the last couple of years, but lately their interest rates have really been lagging. 3.4% interest? Come on, what happened to the 5.5%? I know, interest rates have been falling steadily lately, but that does not mean that I have to give up those interest payments…enter Prosper and Lending Club. I have started lending small amounts of money through these two peer-to-peer loan companies for 2 major reasons:
1. I like free money. Lending Club will deposit $25 into your account right after you open it and before you even put any deposits in yourself, so it is a free $25 that you can use to lend out to others. And Prosperwill also give you a $25 bonus, but if I remember correctly, you have to wait a bit for it.
2. Interest rates at banks are heading deeper into a hole, and I don’t want to follow them. With Prosper and Lending Club, I get to choose the amount of risk and interest I want to make. Want to try for a 10% return on your money? Go for it! But you better know the risk involved before you do! Both companies provide excellent background information on each borrower, so you can “kinda” get to know who you are lending money to. You get to see their credit history, any defaults they might have had, what they plan on using the loan for, etc.. Also, both lending companies let you set up a portfolio of sorts so you can even out your risk while still striving for higher interest payments.
I love the simplicity of sites like ING and other online banks, but I refuse to keep all my pennies wrapped up in an online money market account making just over 3% when I can lend money directly to other people, basically selecting my own interest rate while determining my level of risk exposure. It’s like being a bank, but without the overhead. Mind you I don’t lend a ton of money, but I have been slowly building up some money in those accounts, and my repayments should be starting shortly. It’s nice to finally have someone send me money rather than me send money to out to the bank!