Can You Spare $10 000?

March 24, 2008

Peer-to-peer loans have been making bankers into average people according to Jeninne Lee-St. John of Times Magazine. Because of the “slumping economy”, the banking system has gone into panic mode forcing people looking for loans to turn to the internet in order to ask for help from friends and in most cases, a stranger. Even people with the best credit ratings are unable to get a good interest rate… Not only is P2P for sites such as Limewire and Facebook, you can also add online loans to that list. 

This new peer-to-peer (P2P) loan industry helps any regular Joe exchange cash with the help of an “online facilitator”. In 2007, it had a $650 million dollar debt. Prosper was the first “matchmaker” which began in 2006. To date it has 600,000 users. The way this site works is “borrowers post a request, and lenders bid on how much and at what interest rate they want to give. Several – or several dozen- people fund the loan at a rate agreeable to all. The intermediary runs a credit check, calculates return and takes a fee.” So far, the company’s default rate is less than .5%!! According to Times Magazine, members are motivated to pay back or lend to an actual person rather than a big bank. A great example is Marilyn Honolulu. Mrs. Honolulu has lent a total of $30,000 to more than 100 members, most members she has never met. “I measure my returns in not just the dollar amount, but the fulfillment I get from helping people.” She makes 6% to 7% on each loan. 

How It Works From Times

1 Seeking a Cheaper Loan – The Borrowers

Borrowers need credit scores of at least 640 of 850 maximum and a debt-to-income ratio of 30% or less. For example: Even with credit scores in the 700, people aren’t able to get an interest rate below 15%.

2 Making the Connection – The Online Middleman

The average loan is $9500, funded by 22 to 25 people. For example: Lending Club, which launched May of 2007, relies on fairly strict rules and works with people in affiliated groups, matching up, say, travel agents or MIT alums with peers.

3Looking for a Higher Yield – The Lender

Lenders list the total amount they’d like to loan and the risk level they can stand. They can select individual borrowers who meet their criteria, or the site’s Lending Match program will generate a portfolio. The mean 12.32% interest rate beats the current 3% average return on a CD. For example: Bernadette Lui has $3125 spread among 13 three-year loans. She earns 14.6% and is considering reinvesting her returns with new borrowers. 

I guess this is something that’s worth a try if the bank just doesn’t like you. It sounds fairly promising and a great way for people to get some short term financial help.


Why Young Voters Care Again

February 14, 2008

To start this off, I don’t follow politics at all and to be honest, I don’t vote either. I’ve noticed that a lot of the blogs have to do with politics and the election that is coming up in the States. My parents subscribe to Times magazines and occassionally I will pick it up and read some articles that are of interest to me. On the cover of February 11th, 2008, the heading read “Why young voters care again”. It grabbed my attention so I read through it.

My friends and I don’t follow politics, especially in the United States. Because of this, we don’t vote or anything along those lines. While reading through this article, I noticed that a lot of students (in the states) felt that their votes wouldn’t count and that they couldn’t make a difference. A lot of them felt that their country was going on the wrong track and possibly still could be. They felt trapped having Bush for two terms and are looking for a great impact on the country. Statistics in Time magazine show that students find Barack Obama to be the most inspirational and that if the caucus were held in their state today that they would vote for him. I found this fairly interesting as I don’t know anything about him. I thought that I would get some ideas from my family and cousins. They feel that Barack Obama would be the best suited for this “job”. Once again, interesting.

I think that it’s great that students are finally getting involved and trying to make a difference in this world. It definetely needs to be done. Unfortunately for politics, I think that I will continue to sit back on the side lines and watch to see what happens. Hopefully if students can and do make a difference, we will see something – other than war – being done to the States and our own country.

-Kate 🙂