Peer to Peer Lending Sites

12 Replies

I was looking into Peer to Peer lending. Has anyone tried this sites? What was your experience?

My brother-in-law did this for a while until he started partnering with me on buying promissory notes.

Looking back, he now laughs at the notion. For the same return, he has a lot less risk in buying notes that are collateralized by real property.

In P2P lending, the default rate is about 7.5%, which is a number I would not be happy with.

Tom - I recently checked out Money360 as well based on finding the post Phillip mentioned above.

So far I have been very impressed. This is the first and only Peer to Peer real estate lending website that I am aware of. The site is very clean and straight forward. I registered a week or so ago and have already been matched with over a dozen borrowers that meet my "lender preferences". The borrowers I have been matched with are typically requesting over 10% rates and a have seen a few opportunities in the 12-14% range.

Like you, I am very intrigued with the Peer to Peer model. I see this being the future of lending in real estate.

"Like you, I am very intrigued with the Peer to Peer model. I see this being the future of lending in real estate."

@Lloyd Dixon , come on LLoyd, it may be a niche area, but the future of lending?

Don - I am personally a believer in the future of peer to peer lending. Banking as we currently know it is a broken system. Private individuals and investors aren't being offered attractive rates from banks and borrowers are unable to get financing when they need it most. I have been shocked to see people I know that have loans maturing with equity or own properties free and clear that can't get financing through a bank for one reason or another. With consumer credit so tight, there is a need for something more and peer to peer lending responds to that need for both borrowers and investors.

The internet and social networks enable peer to peer interaction on an unprecedented scale. People are able to connect with each other and put together deals that make sense without the middle man and peer to peer companies, like Lending Club, are flourishing because they can offer loans when banks can't and can even offer better loans than banks in some instances.

There is definitely a niche right now as many people today are in situations where they don't meet the strict criteria that banks require BUT I personally see peer to peer lending as more than just solving a niche area. The current economic constraints are accelerating the growth of peer to peer companies and I don't think it is hard to imagine that companies like Lending Club and Money360 will be among the most important financial services innovations in the near future. I'm not saying these site will entirely replace the traditional banking system but the model has a bright future.

I have been a lender on Prosper for a little over 2 years. I have a small amount of money there, but have a decent sample size with over 80 loans between $50-100. I've had 3 loans charged off, but still returned 14.75% over that time period. I tend to be pretty selective on the loans that I buy, and I think that I can maintain that type of return.

As a borrower, the rates are definitely high, but probably appropriate for the risk of an anonymous unsecured loan.

I love the peer-to-peer model, and I hope that laws change where it can be used for mortgage lending. I guess it's already happening in a few states.

I've been on both LC and prosper a few years. right now my return says 8.5% which I'm not thrilled with but it's rising now that I'm investing in higher risk / higher return notes. I've been happy with it. it's fairly steady if you diversify and study the various websites that crunch the data. I did just find money360 though I'm abit nervous with the minimums (25k per loan??) I may be mistaken but I think that's about right. LC and prosper allow $25 per loan

I recently put an ad on money360 looking for a lender on a buy and hold property. After my information was submitted I never heard anything. So, I didnt have any luck with it.

As a side bar, I had to enter my information three times which was very frustrating. Every time I tried to submit it, the spaces would be blank and everything I entered would disappear. Not sure if it was their glitch or mine, but just a heads up for anyone else who intends to use that site.

I hope this helps.

Originally posted by Kenneth E.:
As a side bar, I had to enter my information three times which was very frustrating. Every time I tried to submit it, the spaces would be blank and everything I entered would disappear. Not sure if it was their glitch or mine, but just a heads up for anyone else who intends to use that site.

Kenneth, it isn't your glitch. The site needs some work to be useful. Even their simple "Your Matched Loan Requests" page doesn't match my lending preferences. If you change lending preferences, your list remains unchanged. Example: I have the "Owner Occupied" lending preference set to "No". Yet, I get owner occupied matches. Same issue with "Requested Loan Size" and "Loan To Value".

@Chris Martin @Chris Martin Thanks for the info. That is somewhat of a turnoff considering the idea behind that site seems very promising.

This discussion just gave me an idea. I think I am going to identify a multi-family property nearby that is listed on the MLS and post the particulars on a few of the peer to peer lending websites and then review them all in one post here on BP. I am open to comments, suggestions, etc. if anyone wants to chime in to see what options are out there…Though I have already tried two of them: Already posted on there for a reasonably priced property and requested 75% loan to value (recommended by the site) and got no hits at all. I requested a business loan for $18k. I was tentatively ‘approved’ for $18k at around 12% though I didn’t pursue it. Once you do pursue the loan you are approved for then it is posted on their site and investors can review your request, credit, etc. and offer to contribute an amount towards your loan. Once enough investors have agreed to contribute and their money collectively equals the $18k you requested then the loan is green-lit. I have a coworker who lends through this site so I know it is legit (for his lending purposes, anyway). He tested the waters by agreeing to lend $2,500 altogether, but broken up into smaller chunks of several hundred dollars that he lends on different loans. His $2,500 is currently yielding a return of 26%. This is because he is lending on risky loans to people who are in credit card debt and are being charged 29% by the credit card companies—so they are more than happy to accept my coworkers loan at 26%.

Be on the lookout for my other post on reviewing these peer-to-peer lending sites.

I have been both a borrower and a lender on both sites. I wasn't happy with Prosper before their restructuring because I lost money ($130 lost out of $200 test money). Lending Club I have not lost any money on the lending side.

Lending Club is better for the borrower due to lower rates.

Ha. I can't even qualify for a loan on peer to peer site and I think its strictly because I'm an investor. :-)

Here is the info they spit back to me.
I have a credit score of 771 out of a possible 850 and I'm
sure the remaining score differential is because I have too many
inquiries. And now I just added another one to boot. :-)

-Scores range from 300 to 850
-Your credit score: 771
-Key factors that adversely affected your credit score
-Too many inquiries last 12 months
-Too many accounts with balances
-Length of time revolving accounts have been established

So the moral of this story is if you're buying a bunch of houses, you probably aren't going to qualify. I've got 8 mortgages in my name plus 2 2nd mortgages so I see why they would show up as a lot of accounts with balances but still. 771 should be golden! And counting mortgage inquiries AGAINST an investor is just pure nonsense.

Oh well, back to the drawing board.
I didn't really believe in these sites anyway. They seem like
a waste of time and effort. But now I've confirmed it - at least
for me. Or at least until I sell all my homes with conventional
mortgages and stop buying any more for the next two years
so my inquiries drop off. :-)

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