Borrowers and investors are increasingly going online to by pass banks and deal directly with each other through peer-to-peer lending services.
In a peer-to-peer loan, a borrower makes a request for a certain amount of capital. Investors review the loan proposal, the rating of the borrower and interest rate and choose what share of a loan they want to buy. A $500 loan for example might have 20 investors pledging varying amounts of the total.
Online companies such as Lending Club and Prosper function as the middleman in the transaction: screening prospective borrowers, presenting loan requests to investors, collecting and disbursing payments while taking a small slice of the action for themselves.For the complete article see the 12-26-2012 issue.
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