P2P Lending and a Small Contest

by Kevin on March 14, 2008

There has been a discussion out in the personal finance blogging world about P2P lending. P2P means peer to peer (just like when you used Napster back in college). Except this time, you are offering to loan a stranger some of your money in return for a higher interest rate than an online savings account.

There are two primary sites that have grown into this industry: Prosper.com and LendingClub.com. I joined Prosper a while back, but never lent out any money.

Gather Little by Little thinks P2P lending is a bad idea. There were several other blog responses arguing against GLBL’s point. I sit somewhere in the middle.

It seems like a great deal for the borrower. If you can’t get a loan from a bank, or if your credit card company has jacked up your interest rate (Bank of America has done this recently) then it is a less expensive source of funds. Plus, if you are unable to get a loan anywhere else, there is still the possibility of getting the loan through P2P lending. For those borrowers, any way to get the loan is a good thing for the borrower.

For the lender, I am not convinced it is a good idea. Sure there are some checks and balances like collection agencies and credit ratings, but you are still lending money to someone that you have never seen before. You don’t know if any of the details are true on the listing. In other words, I think this is an extremely high risk venture. In today’s market you would have to be a real thrill-seeker to go after additional volatility. I wouldn’t put my retirement savings into it even if I could get higher returns.

Contest

However, if I had some ‘play’ money sitting around, I might lend it out to get a higher return on one of the sites. To that end, I am going to start a little contest. I have seen several blogs with Lending Club ads up on site. I’m guessing the person who refers you into the system will earn some sort of referral bonus. (If I’m wrong and there is no bonus then this is going to fall on it’s face!)

I will join Lending Club to earn the $25 free sign-up bonus through your referral. I’ll try to keep this as simple as possible:

  • Each point you earn will put another entry for you into the contest. If you earned three points and there were only 10 total points entered, you’ve got a 30% chance of winning. I’ll take the entires and put them into a random number generator. Your number pops out, I’ll sign up through your referral.
  • How to earn points:
    • 1 point – leave a comment with your referral link
    • 2 points – write a post on your blog linking back here (of course with your referral link within that post so I can sign up if you win)

Thus, you can earn up to 3 points or entries by doing both things. That’s it! The contest will end on Wednesday, March 19th at 7:00PM Central Time.

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