PFI Weekly Updates – March 10 (2009)

Welcome to PFI and the weekly updates – The Peer Lending Edition. Peer lending has gained popularity over the past couple of years with companies like Prosper and Lending Club. Individuals looking to raise capital open up an account on one of these sites and submit a bid for a loan. Investors then bid a certain amount of money and interest rate on open loans using an auction based system similar to eBay. Riskier loans from individuals with lower credit scores tend to carry a higher rate of return than loans from individuals with excellent credit. I have been a lender on Prosper for over one year now as well as a borrower for almost one year.

In recent months, interest rates have dropped significantly making peer lending a more attractive investment for people looking for a decent rate of return. High interest savings accounts and CD rates have fallen below 2% which makes the Lending Club’s average return of over 9% worth the risk for people looking to earn a decent return on their money. Peer lending does come at a risk as the money you lend out is not FDIC insured. That basically means that if a borrower of a loan defaults and declares bankruptcy – chances are you will not see your investment again. Regardless of the risk, I still believe that peer lending is a viable investment tool that can earn you passive income overtime – provided you define your investment goals.

Check out my eHow article where I show you How to Earn Over $100 in 5 Easy Steps by opening up a Lending Club account –

Personal Finance Blog of the Week
As part of my effort to meet my personal finance goals for 2009, I plan to visit other personal finance blogs and help promote the good ones anyway I can. Each week I will write a short review of a site that I believe is worthwhile checking out.

• Studenomics – Today I would like to highlight a personal finance site that I came across a few months ago and began following called Studenomics. This site offers a different perspective than most personal finance sites. The author of this site is working his way through school and provides a very nice perspective to saving money and building passive income while going to college and getting an education. Please take the time to go over to this site and say hello to MD.

Articles I liked this week
Here are some past peer lending articles that I have enjoyed reading. These articles include a lot of useful information, analysis, and stats on lenders experiences using Prosper and Lending Club. Be sure to check them out if you are interested in peer lending!

1 – Dusty from Chasing The Bull decides to start peer lending by opening an account with Lending Club.

2 – Frugal Dad decides to give Lending Club a try.

3 – Pinyo at Moolanomy posts a must read introduction to Peer-to-Peer Lending.

4 – LuLuGal from How I Save Money talks about taking out a loan using Lending Club to pay off some debt. This offers an alternative view as a borrower instead of a lender (which I am both as well on Prosper).

Have an wonderful week!

Tagged as: Lending Club, peer lending, Prosper