Learn the Basics of Borrowing and Investing with Peer to Peer Lending

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During the week I share the latest p2p lending news on Twitter as it happens. Then every Saturday I take the most interesting news items and blog posts from the past week and share them here.

How to find the best payday loans near me? Check answer on Payday Depot.

Random Thoughts - Introducing PeerCube: Smart Lending with Peer Insights for Lending Club (introducing a new analysis site for Lending Club investors).

Nickel Steamroller - September P2P Investing Update (long time blogger shares an update on his Lending Club and Prosper investments).

P2P Money Blog - Zopa to drop C and Y markets (Interesting move from Zopa in the UK in dropping their highest risk borrowers from now on).

Wall Street Journal - Student-Loan Online Start-Up Gets Financing (VC’s must see a big future for this new startup focusing on student loans – they just invested $77 million!).

Prosper to Retire - August 2012 | 25.53% Effective Annual ROI | 9.34% Overall Return with Prosper.com (New Prosper investor shares his progress).

Afluenta - AFLUENTA.COM RELEASES THE FIRST COLLABORATIVE FINANCIAL NETWORK IN LATINAMERICA (Press release about the first p2p lender launching in Argentina).

Everything Finance - P2P Lending With Lending Club: A Review (A new Lending Club investor shares some thoughts).

Nickel Steamroller - Boosting Your Prosper Automated Quick Invest Return With Sorting (Discusses the sorting feature when searching for loans on Prosper).

Prosper to Retire - P2P Lending 104 – How should I start? (Some ideas for new investors at Prosper).

Lending Tuber – Words with Lends (Presenting some analysis done on words used in the description field of Lending Club loans).

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Most people think they understand how interest works. You invest $100 at 10% then your annual interest payment is $10 a year. If you are investing for a fixed term, say three years, that will mean $30 in total interest payments. Simple math.

But with p2p lending it is different. This same $100 invested in a 36-month p2p loan at 10% will get you far less interest than $30. If we compare apples to apples and assume no service fees then this $100 investment will net you around $16.15 in interest, close to half the interest from the previous example. What gives?

P2P Loans Are Amortized

Are you really getting just over 5% or so annually on your money? No. The reason the total interest is less is because you are investing in a fully amortized loan. What this means is that with each payment you are being paid back some principal as well as interest.

Let’s continue our example to demonstrate. The monthly payment for your $100 loan at 10% is $3.23. Given a standard amortization schedule the first payment is split into $2.39 of principal and $0.83 of interest. So, your $100 investment has been paid down by $2.39 and the principal balance is now $97.61. S0, next month you will not receive interest on $100, you will receive interest on $97.61. Herein lies the big difference with amortized loans.

Below is the full amortization schedule for a $100 loan at 10%. Now, keep in mind I am ignoring service fees in this example – in reality at Lending Club and Prosper  a 1% service fee is deducted with each payment.

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20 Things You Didn’t Know About P2P Lending

September 10, 2012

This past weekend I attended the Financial Bloggers Conference commonly known as Fincon12. Around 400 personal finance bloggers descended on Denver to discuss, learn, chat and generally have a good time. On Friday night of Fincon12 there was an Ignite Event. This is where participants are given five minutes to speak about a personal or professional [...]

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Roundup of Social Lending News – September 8, 2012

September 8, 2012

Every Saturday I bring you the latest news from the world of peer to peer lending. These are the best of the news articles and blog posts from around the web that I shared on Twitter this past week. News was sparse in this holiday shortened week, you should be able to read all five articles below [...]

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Get a $1,000 Bonus with a New Prosper Premier Account

September 6, 2012

I first wrote about Prosper’s Premier service back when it was introduced earlier this year. At the time I said it was a good move by Prosper because there are many investors who like the potential returns offered by p2p lending but don’t want to go to the trouble of selecting loans themselves. If you [...]

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Interview with Lending Club CEO Renaud Laplanche

September 4, 2012

Editor’s note: The interview below was not conducted by me. Another publication conducted this interview and wrote the article but then decided not to publish it. Lending Club contacted me to see if I wanted to publish the article and I agreed because I thought it would be of interest to you. The links were [...]

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Roundup of Social Lending News – September 1, 2012

September 1, 2012

Every Saturday I bring you the latest news from the world of peer to peer lending. These are the best of the news articles and blog posts from around the web that I shared on Twitter this past week. It was a very light news week to say the least. The biggest news item of the week [...]

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Lending Club Cracks $70 Million, Prosper Has a Down Month

August 31, 2012

It was another great month for p2p lending with total loan volume for August coming in at $84.4 million. But it was two different stories from Lending Club and Prosper this month. Lending Club Jumps Another $10 Million to $70 Million After first crossing $50 million in new loans issued in June and then $60 million [...]

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The Collections Procedure at Prosper

August 29, 2012

When I was at Prosper headquarters earlier this month I sat down with Nancy, the operations manager, who is also in charge of loan collections. She walked me through the collections procedure they follow for all borrowers who become past due. For a start she said that around 98% of borrowers are on an automatic [...]

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More Loans Means More Choices for Investors at Lending Club

August 27, 2012

For the first half of this year the number of available loans at Lending Club hovered between 700 and 1,000 loans. Occasionally the number went over 1,000 but it averaged somewhere around 800 loans available to investors at any one time. But in the month of June this changed. By June 21st there was over [...]

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