What is Social Lending?
Social lending is both a very old and very new form of a financial transaction. For thousands of years people have borrowed money from friends or family members and that is the most basic form of social lending. In the last few years, however, this process has been formalized and expanded to allow you to have more people to borrow from and more people to lend to. This includes allowing the lenders to make a profit on their loans and giving the borrower a larger pool of people from whom to borrow from. This arrangement means that there may be more money available to borrow and lower risk for the lenders.
Modern social lending, also known as peer-to-peer lending, or just peer lending, really took off as different web 2.0 sites grew in popularity which helped connect more and more people to each other via social networks. Most social lending loans are used for debt consolidation but they can also be used for any reason from a mortgage to business funding to even small things like vet bills or car repairs. The flexibility involved in this type of loan is one of the things which many people like about it.
Since there is no formal financial institution involved in social lending, there is often a lot more flexibility involved with terms and interest rates. There are, however, companies that will help draw up the paperwork and help get agreed upon rates and terms for the different parties. These third party companies can help ensure that a fair agreement is in place for all parties involved. While they are not the actual lenders themselves, they can help ensure that a successful social loan is in place for all parties involved.
Social lending can be done with just one person lending money to one other person or it can be done with indirect lending which means that a pool of lenders (typically individuals) will lend money to one (or more) individuals. This helps spread out the potential risks involved with the lenders and can often help apply additional pressure to the borrower to repay on time. Since in many cases the lenders know the borrowers on a personal level they more likely to repay the loan. If you need a loan, you should consider peer lending. If you have some extra cash and would like to get a decent return on your money, then you too might want to take a look at peer lending.