In the past five or six years, many Americans may feel like getting a line of credit parallels to being at a David Copperfield magic show, at one time, you could easily get free offers in the mail to consolidate your debt or gain access to easy capital, but the days of capturing an unsecured line of credit have all but vanished into thin air from our banking system. It's hard enough to acquire new capital if you are a small business owner as you practically have to give your left arm or right eye, and personally guarantee everything you own just to get your hands on some much needed funds. Even worse, if you are an individual with a small amount of personal debt from $5,000 to $25,000, going straight down to your local bank to get these funds can be just near impossible.
However, for both investors and debtors alike, every time there is a serious problem it creates the potential for a tremendous opportunity. Americans in need of debt have relied, in recent years, on going to friends, family members, and even work colleagues to borrow money. Today with the global reach of the Internet, the debt space of microloans has now generated a new thriving market. If you have to get your hands on some short term cash to pay off a car loan, consolidate credit card debt, or even do a home addition, here are some websites that may be able to fill the void in your financial life:
- LENDING CLUB- (www.lendingclub.com) - Lending club is a website that brings together both investors and debtors who are interested in dealing with unsecured personal loans. With Lending Club, you can attain a loan for three years or five years for automobiles, credit cards, home improvement, and even special events. Based upon a number of factors including your personal credit score, you will receive a ranking from A to F, which will ultimately dictate your overall interest rate. Lending Club will link your bank account for repayment of the loans so the payment comes out automatically. There is no charge for early repayment of the loan, but here's the catch: You can only get the funding by attracting investors out there that want to invest in your debt. So, if you are looking to get your hands on $10,000 in funds, it could take 100 to 200 different investors before your loan is fully funded.
- PROSPER- (www.prosper.com) - Prosper is another microloan website that was created to incite peer to peer lending. Simply put, Prosper wants to connect people who want to invest money with those out there who need to borrow money. Similar to Lending Club, Prosper offers three to five year terms on loans that range from $2,000 up to $35,000. Your identity is never shown to people who invest in your overall debt, but your rate will be determined on your 'Prosper Rating', which is generally based on your credit score from Experian. Be careful about the interest rates, because lower rated debtors can pay over 35% in interest on their money.
- LENDING TREE- (www.lendingtree.com) - Lending Tree (not to be confused with the aforementioned Lending Club) became a popular website through its advertising commercials the described how they would pit three or four different mortgage brokers against each other to compete for your home loan. While mortgages are still their bread and butter, Lending Tree has expanded to offer debt avenues such as auto loans and unsecured loans called "signature loans" for credit card debt and even payday advances. The main issue is that Lending Tree is like any other bank and the process of getting approved is extremely difficult. Those with a higher credit score will have a really good opportunity to be able to secure some capital while those at the lower end won't stand much chance of acquiring a loan.
- SOUND FINANCIAL- (soundfinancial.com) - Sound Financial is a new website that was created specifically for borrowers that have bad credit. Their business model centers around bringing clarity, transparency, and trust to an industry where predatory lending runs rampant. Sound Financial offers a host of unsecured loans that are designed for bad credit such as installment loans and lines of credit. You can expect to borrow between $200 and $5,000. Unfortunately, if you want to borrow more—and you have bad credit—you'll have to apply for one of their secured loans. Like Lending Tree, Sound Financial is a marketplace where you can compare interest rates and terms from multiple lenders. The difference is that the lenders on Sound Financial have less stringent requirements on credit and income. However, the ease of approval comes at the price of higher interest rates and fees.
It's fascinating to see how companies evolve and financial opportunities become available as shifting market economic conditions change. If you are in a pinch to get capital and are having a hard time with the bank, websites like Prosper, Lending Tree, and Lending Club can all be opportunities to solve your problem. However, remember that carrying any type of unsecured debt is generally not a good idea, but using one of these sites could be Your Smart Money Move to get some cash without having to sign away your life!
Written by:
CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Editor in Chief of Your Smart Money Moves
Co-CEO and Founder of oXYGen Financial, Inc - The Leaders in Gen X & Y Financial Advice and Services
Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.
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