Social lending or what known as peer to peer (P2P) lending are basically loans given out by individual investors to individual borrowers without involving any procedures with the banks and thus borrowers are to repay the loans at a higher interest rate due to a higher risk involved on the lenders’ side.
Social lending are much similar to unsecured and payday loans and they have become really popular because less procedures are required, thus faster and easier to be obtained by most people. Online communities of P2P lending are also growing fast as well with more and more company websites offering social lending service for both investors and borrowers, for instance, LendingClub.com, Fynanz.com, Prosper.com and much more.
If you are an investor who can afford to risk by lending out your money directly to any individuals over the internet or via any social lending websites, you can expect a great return in your investment with profit rates much higher than saving your money in a bank account. Otherwise, if you are a saver, you might as well put all of your money into your bank saving account and get less but much stable interest periodically.
Social lending company websites will always perform a background check of all of their borrower registrants including the borrower’s income, credit rating and credit statement to minimize the risk bared by individual lenders. Borrowers who do not meet the credit standards set will be declined, thus investors can be much assured of a full repayment from qualified borrowers.