Paul Ferraresi

On the other side of the equation you may have a few dollars to invest (lend out). Your present money sitting at a local financial institution may pay you 3-4%. P2P lending allows you to put some money “on the street” with some returns as high as 17%. The return is dependent on the website’s mission, loan type and borrower’s credit history.

In this social lending program peers are the sources of funding and the sites do identity verification, credit checks, fund maintenance and even collections. The sites either charge a percentage of the loan or a flat fee. These programs are highly automatic, transparent and use Web 2.0 era methods to match borrowers and lenders.

“Prosper” has 500,000 members with more than $100 million exchanged in two years via eBay-style auctions. Prospective borrowers post a loan request and a summary of the loan needs. The site then researches credit history and other ratios. The borrower explains his need for the funds. Minimum bid to lend money can be as low as $50. With many people spreading the risk you have a method to diversify your loan portfolio.

The average American has over $5,400 in credit card debt and could pay it off sooner with a lower rate.

Affinity lending in which borrower and lender have a preexisting relationship is the focus of Virgin Money U.S.A. This site provides loan documentation, payment schedules and collections. Virgin specializes in real estate, business and other long term loans.

An automated version is Loan Back (www.loanback.com). This is a true do-it-yourself program. You can have Loan Back’s programs help create promissory notes for $15 or just download forms for $10.

Here are a few others for you to check out:

Lending Club

Zopa

Micro Place (www.microplace.com)

www.Kiva.org

All these programs have higher risk, but the returns may be worthwhile. Check it out!