Peer-to-Peer lending
Peer-to-Peer lending is a simple idea:
Some people want to borrow money.
Some people want to invest money.
Instead of going to a bank, why not cut out the middleman?
Peer-to-Peer lending is all about cutting out the bank from this transaction: Previously, investors would lend their money to the bank. The bank then would loan out the money to borrowers. However, as with all businesses, the bank takes a large cut out of this transation: Lenders get less, Borrowers pay more.
DVD Loans is a site that helps people lend and borrow money on Prosper, a financial marketplace: A borrowe states his request for money - For example, $1000. Lenders then bid their money for a share of the loan. If 20 lenders bid $50 each a loan, the $1000 loan is funded. The borrower then pays back his loan with interest over the next 36 months.
With this model, everybody profits: The borrower gets better terms for his loan, the lenders get better returns on their investment.
Whether as borrower or lender, everybody can use Peer-to-Peer lending --
good or bad credit, little or large savings:
Borrowers with bad credit can get loans if they convince lenders to bid. Lenders can start investing with only $50.