Uswa Budgeting Finance

The worldwide lending industry is a multi-billion dollar industry where people borrow from banks, financial institutions and other private lenders. In the last couple of years, the lending industry has gone through an evolution and has given way to social lending as the new and promising mode of lending. Also known as peer- to- peer lending or person to person (P2P) lending, one of the first companies to set the base for social lending are Zopa, Prosper and more recently LendingClub.

Zopa is considered the first social lending marketplace in the world and its roots are in the United Kingdom. With the launch and immediate success of Zopa, other similar peer to peer lenders have sprung up like Prosper in the US, Boober in Netherlands and Smava in Germany.

If you are wondering whether the P2P loans offered at the social lending sites are worth it or not then the answer is most likely yes. There is not much of a difference as far as the P2P loans from these lending hubs and from a bank is concerned. The difference lies in the fact that there are no banks, no long procedures, and no middleman and above all the entire process is transparent for both the lenders and borrowers (no more hidden hard to find loan agreements!).

The main objective of the social lending hubs is to offer an online loan with the best interest rates and to make customers feel like they are borrowing from a friend or community. This peer to peer borrowing is increasingly being seen in a new light and is being considered as a part of community borrowing (which was more traditionally offered by small local community banks).

Other benefits:

1.class, which they can add to their portfolio because it doesn’t fall under an investment or even a savings account.

2.Choosing interest rates and loan repayment: There are several benefits for lenders as well as borrowers. In social lending hubs like Zopa or Prosper, lenders have the freedom and the flexibility to choose a loan repayment time period as well as the interest rate on the p2p loan.

3.Active community participation: one of the salient points is that this kind of a lending hub make borrowers feel as if they are following from an actual person and not an organization or a faceless institution. Hence it helps in developing a strong community feeling.

Lenders at any of the social lending websites have the power to set a minimum interest rate that they want to earn and can bid in an increment of $50 till $25,000 through loan listings. Borrowers can create a loan listing for a period of 3-years, and borrow an amortized and unsecured loan of up to $25,000 and also provide the maximum interest rate that they will be able to pay a lender.

The success of Zopa lies in its facts and figures. They are the largest lender today and have loaned out in excess of $930,000. The return on investment for lenders has been around 5.01%, which is healthy especially in the wake of the fact that social lending is still in its nascent stages. One of the top lenders even got an ROI of 19.8% on social lending websites.

The Lenders

By now you are probably thinking who these lenders really are? Are they banks in disguise or are they really other people? The truth is that they are really people. Let’s take Zopa and Prosper for example. Both the social lending hubs are backed by Benchmark Capital who also funded eBay. Zopa or Prosper are the best alternatives that anyone can have to banks or other financial lending institutions, however they are restricted to the UK and US markets.

The current business model of Zopa is based on a 1% exchange fee that borrowers are paying them upfront. In return, Zopa is offering borrowers a better interest rate by cutting out the bank middleman. More than that, a borrower will have more control of the entire lending process and has the flexibility to establish an interest rate.

Zopa is the acronym for Zone of Possible Agreement, and its lenders include only U.K. residents who are over 18 years of age. To qualify as a lender, a person needs to have a valid bank account and a high personal Equifax credit rating. There are two restrictions for becoming a lender and they are:

•Lenders have to be individuals and not businesses.

•Lenders will not be allowed to have anything in excess of £25,000 ($47,000) in outstanding loans at a given point in time.

The American counterpart of Zopa is Prosper and they also handle maximum loan of $25,000 at a time. At this point the future of social lending looks bright as it has now hit New Zealand and Australia with the first peer to peer lending hub in Australia to launch shortly being Lending Hub (you can see their site at lendinghub.com.au and their active blog at blog.lendinghub.com.au) which will offer P2P loans with a strong community focus to ensure a truly social experience for both borrowers and lenders rather than just being a transactional online loan tool.

Most debt elimination companies are not genuine in their services making consumers waste more money contrary to their wish. Federal Trade Commission is an international organization body that is aimed at helping and protecting consumers from such institutions. Their agencies offer services to debtors regarding their creditors and debt collectors. They also offer budget plan services to consumers to avoid overspending.

When choosing a credit counselor, the FTC recommends a consumer to go for the company with more services. Counselors should also offer budget and debt management lessons to borrowers to enable them have better understanding and, know where to start solving their problems. If a counselor insists you to choose a Development Management Program without even spending adequate time in understanding your financial difficulties, just know you are with the wrong people.

You should never choose a credit counselor until all your creditors have accepted. Before making any payment to the credit counseling institution, its your responsibility to ensure your creditors have accepted the plan. Any agreement made should be written on paper. Its important to go through it once more and understand it. The agreement should however include the firm’s business name and address, price quotation, services offered and,  the duration you will take to complete the plan.

Before choosing a Development Management Plan, the FTC recommends you to ensure all creditors have accepted the plan before you begin paying the bills. Go through your monthly statements and report any errors found immediately. Contact your creditors each time you make a payment to ensure money reaches them on time.

Many consumers receive results from debt settlement companies. According to The Association of Settlement Companies (TASC), consumers seeking to manage their debt have higher success rates when using credible debt settlement companies rather than credit counseling services. TASC, the non-profit watchdog organization for self-regulating the debt-settlement industry, gathered the information from various sources, including the Consumer Federation of America and National Consumer Law Center, the Executive Office for the U.S. Trustees and testimony by credit counseling companies.

 

With both shorter program durations and lower budgeted monthly payments, debt settlement programs frequently see higher success rates and fewer dropout rates. Other differences between credit counseling and debt settlement are:

1. Debt settlement companies do not receive any fees, contributions or other forms of compensation from any entities other than the debtor client. Meanwhile, credit counseling companies get money each month from their customers, plus they receive “contributions” from credit card companies and “fair shares” from banks.

2. Debt settlement programs are typically 36 months or fewer. Credit counseling programs are usually 60 months or more.

3. For consumers that complete programs, the total cost of a debt settlement program is usually about half the cost of a debt management program offered by a credit counseling company.

4. Debt settlement programs achieve individualized and customized results depending on a consumer’s circumstances and needs. Credit counseling payment plans are fixed payments over a length of time. 

You need an honest means of dealing with your debt problems efficiently. Debt settlement involves a personalized budgeting plan that will effectively enable a debt settlement negotiator to reach a compromise with creditors that actually settles the debt for less than the full amount. At Credit Answers we are here to help you. At any time you can pick up the phone and call 800-297-6417 and speak with your personalized debt settlement coach to answer your questions