Basically the system works by Lenders (people with savings looking for a return) putting money into an account which is then distributed amongst many borrowers at a time. So as to keep the risks to a minimum, money from each lender is spread over many borrowers at once, who build up their loan from a selection of lenders. It makes sense really, especially when you look at the rates on offer.
Social lending is for consumers who are fed up being at the mercy of their bank. Whether you have savings and are earning peanuts in interest or you are looking for an unsecured loan and are facing daylight robbery with the interest rates being charged this may be the solution for you.
One thing's for sure, when social loans first came to the fore in 2006 it was a slow start and even to this day is an unknown strategy for consumers looking to borrow or save money.
Maybe the credit crunch will change this?
With the credit crunch we have seen Banks, consumers and the government distressed by the global turmoil. But beneath the financial storm, banks have increased their margins and are now charging far more to lend money than they have in recent years, especially when the Bank of England interest rates are at their lowest level in the UK since World War 2.
Social Lending has been engineered for consumers who want to join a community of like-minded people who can borrow and lend to each other in a secure, controlled and fair environment. Typically interest rates provided through social lending are better for the saver and borrower because the bank margin has been squeezed out. Yes, the intermediary will take a small percentage from every transaction to cover costs and maintain the exchange but you'll see the real cost savings when you compare the interest rates on offer.
One foot note would be that to qualify you'll need to have a strong credit report. If you don't it's best to get some advice first on the best route to take. Need help with homeowner loans bad credit?
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