Peer-to-peer or P2P lending platforms ease the process of debt financing by allowing people to borrow and lend money without a financial institution. It is way faster and cheaper than any bank.
Here is an in-depth, detailed analysis of the top three P2P Lending platforms to invest in this 2018.
1. Prosper Loan Marketplace, Inc.
Prosper was the very first P2P lending company in the US. Their investors have helped fund about $11,663,465,463 since 2006.
The platform has tremendously grown since its start. It now has over 250,000 members. They have reported that 83.5% of their active investors have received returns that even exceeded their expectations.
Prosper is available to investors in all states, including District of Columbia, except Alabama, Arizona, Arkansas, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, and Vermont.
Loan Interest And Return Rates
They have loan interest rates ranging from 5.99% up to 36%. Prosper has a slightly higher rate compared to other lenders, but they are one of the few who allows borrowers with low credit scores.
They base their interest rates on credit information such as available credit, number of inquiries, recent delinquencies and credit card usage.
Investment returns vary according to the Prosper loan rating ranging from AA or lower risk with the lower return of 4.07% and HR or higher risk with the highest return of 11.68%.
With the Automated Quick Invest, investors can put their money to work very quickly. It is a great feature which helps investors to keep their money fully invested.They would only have to choose criteria, such as loan grade and others.
Investors only need 100 notes or $2500 to be properly diversified. This amount is lower compared to other lending platforms. Each note requires a minimum of $25, but since Prosper doesn’t have fixed increments, it can be any amount past that.
For investors who don’t like to manage their investments, Prosper has a Concierge Service. This service allows investors to provide the amount on which interest rate they want to invest in; then Prosper will take care of the rest. It starts at $2500 with no other additional fees attached to it.
- Borrowers And Default Rates
Prosper’s borrowers have an average FICO score of 710, versus the usual 695 in the US. The average annual income of their borrowers is $93, 043, compared to a typical $72, 641.
With Prosper, you get access to an extensive and detailed, borrower profile compared to other lender platforms. Money lenders can get access to loan histories of borrowers who have previously used Prosper. This feature allows them to review if a borrower has a good standing loan history with Prosper.
Prosper had dropped its default rate since they had changed their risk model and underwriting in July 2009. Since then, their default rate had dropped to 3.6 in 2014.
2. LendingClub Corporation
Renaud Laplanche founded the LendingClub in 2007. He was a premier player in the P2P lending space. His company is a huge entity in the online lending marketplace, whose main goal is to connects lenders and borrowers.
LendingClub has over 150,00 investors, 2 million borrowers and $33 billion loan investments.
LendingClub is available to new investors in all states, including the District of Columbia. However, the states of Alaska, New Mexico, North Carolina, North Dakota and Pennsylvania are only available via FolioFN which is a trading platform used by LendingClub.
Loan Interest And Return Rates
Their interest rates range from 5.2% up to 28.99%. They take into account the borrower’s credit report information such as FICO score, number of recent credit inquiries, length of credit history, the total number of open credit accounts, revolving credit and others.
With this formula, most borrowers end up paying higher rates for the higher loan amount and longer term.
When you invest in the consumer credit asset class, LendingClub will provide 4% to 6% solid returns and monthly cash flow. 99% of investors with over 100 notes saw positive returns to their investments.
Investors receive the payments for the principal and interest, together with monthly cash flow which can amount from 2% up to 5%, as the borrowers repay their loans.
In LendingClub, they will provide you with three options when you want to invest in a semi-automated way. You can choose from High, Medium and Low-risk loans.
If you prefer LendingClub to automate your investment fully, you can get a PRIME account. You would only need to specify an interest rate, and then the system will take over from here. The LendingClub PRIME has a minimum investment of $5000 and a one time fee of 0.8%.
The minimum investment amount is $25 per note, and other amounts are only available in $25 increments. You need a minimum of $1000 to get an account and properly allocate your investment.
Borrowers And Default Rates
It is important for borrowers to have a decent credit before obtaining a loan from LendingClub. The company uses Transunion to pull credit data and allow borrowers with a minimum credit score of 660.
The LendingClub had a default rate of 3.2% way back in 2010, but it had since raised to 8.7% in 2014.
3. Upstart Network Inc.
Launched by ex-Googlers in 1024, Upstart has created more than $1.7 billion of loans. This lending platform has been very popular among younger generations of borrowers who don’t have a long credit history. It is mostly because Upstart’s underwriting model goes beyond FICO scores.
Their goal is unique in their own way as they seek to provide superior loan performance and improve their borrower’s access to credit.
Upstart is available to any accredited or licensed money lender in the US. The accredited investors are open to investing in all states as they only are subject to federal securities regulations.
Loan Interest And Return Rates
The average Upstart loan interest rate ranges from 11% to 15%. Loan amounts can range from $1000 to a maximum of $5000. Loan terms may last three to five years.
There is no minimum income, minimum credit history or maximum debt-to-income ratio. But, Upstart does not accept borrowers who have bankruptcies or public records on their report. Or those who have six or more credit inquiries on their credit report for the last six months. They also prefer borrowers who don’t have a debt ratio of 16%.
Upstart offers their lenders return rates around 7.4% across all grades with 97.6% of investors earning positive IRR. Investors earn on average as much as 5.6% to 9.2% across all loan grades.
To invest with Upstart, you need to be an accredited investor. It means you need a have a net worth or joint net worth exceeding $1 million, excluding the value of your primary residence. And, an annual income higher than $200,000 in the last two years.
One of the major difference of Upstart compared to other lending platforms is that they do not charge any investor fees. Also, if a borrower defaults, Upstart refunds investors with the origination fees in the loan.
However, in Upstart, a moneylender has the minimum capability to pick loans. You would be able to view several filter criteria, but after moving forward, there is a disclaimer warning you that they would no longer support additional filters anymore.
The only filter you can only adjust is the risk rate, from AAA to D. After that, your investment would be entirely automated.
Borrowers And Default Rates
Upstart borrowers’ FICO Score average is around 688 and weighted average income of $84,466. The 75.8% of which are college graduates. The most common reason, which makes up to 75% of the borrowers are looking to refinance their credit cards.
According to Upstart, about 91% of their loans are either current or paid in full. They allow borrowers not based on FICO scores alone but also consider their educational and employment qualification, such as degrees attained, school or university they attended, the area of study, occupation, and employer.
This lending model helps them to develop a statistical data of the applicant’s financial capacity and personal propensity to repay. However, this model also generates a rate of 5% default of principal.
P2P lenders platforms are a lot of help to borrowers and lenders. Investors generate revenue from a portion of the interest which borrowers pay on loans. On the other hand, borrowers benefit from easy access to funds.
It would pay to be diligent with your work in finding the best P2P lending platform and planning a strategy which can generate more revenue for your investment.
The Worst Advice About Credit Cards That You Should Never Follow!
Owning a credit card comes with its own advantages and disadvantages. At times things work out well, whereas at other times you may end up using your card in a wrong way. The key to use a credit card properly is knowing what works and what does not.
Family and friends do shell out advice constantly about cards. But not all advice are correct. Some common notions about cards are not worth considering at all. Know what these are and use your card wisely. Let’s check the worst advice about credit card usage.
1. Own as Many Cards as Possible
Usually this advice is doled out to emphasise that you can earn maximum benefits with maximum cards. And it will always be shared by someone who can afford so many cards. But that is not the case with everyone else. Multiple cards can make you develop a habit of spending unnecessarily just to enjoy the benefits.
This can lead to credit card debt. If you are unable to afford the annual fees and bills, then any benefit you derive from any card is nullified. So, do not go by the lifestyle of others. Check your budget and financial standing while choosing to own credit cards.
Tip: Own a card or cards only if you are able to afford them.
2. Pay Only the Minimum Due
This advice is quite common among cardholders. Usually, this advice is given by those who pay only minimum due each month. It is like bearing as minimum responsibility as possible while trying to ignore the bigger picture.
Paying only the minimum due will prolong your card debt. Additionally, you will incur more costs with your payable interest. The wise decision would be to clear your debt as soon as possible.
Tip: Pay the full amount each month and save money on interest charges.
3. Max Your Credit Limit
This advice is usually offered by those who can afford maxed out card bills or those who pay only minimum due. Maxing out your credit limit not only adds to your debt, but also decreases your credit score.
The recommended usage is 30% of your credit limit. Anything more than that, will affect your credit score. And reaching the maximum limit will result in high interest rates if you do not pay immediately. Other reason to not max out your card is that you need available limit for any unforeseen emergency.
Tip: Utilise up to 30% of your total credit limit.
4. Close Unused Card Accounts
This advice will be offered only by those who do not know exactly how card accounts co-relate to credit score. An essential factor of your credit score is the length of the credit history. This means closing any old card account would make it look as if you have a short credit history.
Banks prefer a long and excellent credit history, especially while lending financing for a mortgage or for a high amount. The longer your credit history is, the better is your credibility.
Tip: Do not close old or unused card accounts.
5. Apply For Multiple Cards at the Same Time
This advice will be given by those who do not know that multiple applications can affect the credit score. When you apply for multiple cards with different banks, each bank would perform a credit check on you. Each check would decrease your score.
Additionally, banks would know that you have applied at multiple sources, and may reject your application if you seem too desperate. The best thing to do is to research on all cards that you are eligible for, and choose to apply for the one that is the most suitable.
Tip: Compare quotes on different cards before you apply for a card.
6. Credit Cards Are Not Required
This advice will be given by those who have no need to build a credit score due to ample savings or inherited wealth. Credit cards are quite important to establish your credit score. Debit cards do not contribute to your score.
Any working individual should have a credit score for purchasing various financial products and services in the future. So, get a credit card, but use it wisely. Do not use your card for unnecessary expenses. Pay off the full balance each month.
Tip: Manage your card properly to establish an excellent credit score.
Things to Do With Your Credit Card
- Own only the cards that you can afford.
- Do not carry a balance into the next month.
- Use only 30% of your credit card limit.
- Do not close old or unused card accounts.
- Pay your card bills on time.
- Monitor your card usage each month.
- Use your card to build a reputable credit score.
Make the Best Use of Your Credit Card
A credit card will prove to be a valuable financial tool if you use it wisely. Learn more about credit cards and how they operate to know exactly what to do with them. Before you follow any advice on card usage shared by others, research on it to check whether it is true.
Follow any advice only if it benefits you, now and in the long run. Build a credible history with your card now, and easily get access to various banking products and services when required.
How is the Credit Card Grace Period Established?
Purchasing a Credit Card is the easiest thing to do and to shop using it is even easier. With just a swipe, the transaction is made, and the best part is that the moneyisnot withdrawn from your savings account. You pay off this amount at the end of the month or in the form of small instalments set by your bank, you slowly pay off the debt. The duration offered to clear the dues by the Credit Card company, for which no penalty is chargeable is termed as the grace period. Your billing cycle gives you a defined time-limit to clear the dues. In between this period, no interest is to be paid by the cardholder. However, the grace period varies for different customers. For a salaried person it revolves around a month, in general, but what are the factors involved in deciding the grace period and how is it established?
Usually, SBI Credit Card and most of the card issuersoffer a grace period of minimum twenty-one days to the cardholders. This means your billing cycle has to cover a minimum of 21 days and the company must deliver your statement before 21 days of your due date of payment. The due date for the payment shall remain the same thereafter; the company does not hold the right to make any changes in it. On the due date as well, you can make the payment before the time stipulated in your agreement, to save your hard earned money from going away as Credit Card interest. If the due date falls on a weekend or a government holiday, the next working day will be counted as the due date. The maximum time offered by Credit Card companies as the grace period is 25 days.
Behind your Credit Card statement, there are certain things mentioned, to which you need to pay heed. It talks about how your finance charges are calculated, how you can find a copy of your Credit Card agreement on your card issuer’s website or via e-mail. However, nowhere it is mentioned that how this grace period is calculated. The agreement offered by the Credit Card companies does disclose the grace period that will be provided to you by them.
The Credit Card company is not bound to give you a grace period. There are conditions when no grace period is available for the cardholder. For instance, if your balance amount is being transferred for next month, again and again, you are no longer eligible for a grace period. Keep your interest as low as possible when using a card, since there is no point in reducing the grace period of your card. You may not have it eventually when there would be an actual need for the same. It is always recommended to start your billing cycle with zero balance, to avoid any incurring charges.
When you Apply for a New Credit Card Online, you can check a service agreement before you get yours, from a database of the accords that will help you understand the utility as well as precautions for using a card. As per a new regulation, declared by the Reserve Bank of India (RBI), three more days have been added to the grace period. On July 16, 2018, a circular was issued to companies to give more time to the customers for paying off their Credit Card bills. The top Credit Card companies have informed their clients about this revision in policies approved by RB. The governing body has not only thought of the consumer’s interest but for the company’s as well. The customer will now get some more time to clear the dues. While if the payment remains due even after ninety days of the due date, the credit card will be considered as a non-performing asset.
An additional three day grace period has been offered considering technical issues like the ill-functioning of the server or some other glitch. The forgetful users may also get some time to save themselves from the unwanted payment of interest. This step has been taken by RBI to establish a Credit Card discipline. The benefits or the adverse effects of the same would be known only after some time.
To avail the benefits of this grace period, it being a variable, the client needs to calculate it precisely. If you know, that you will have to travel to a specific location and you do know the date, then you can book the tickets on the very day or near to the time when your statement period closes. In this way, you will have an extended grace period for paying off the credit. Credit Cards are a game of intellect, manage your finance with great dexterity when using a card.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.
7 Common Myths About Stock Markets
Investing in stock markets has proven to be a highly profitable option, although it still has its risks. There are millions of investors who have already made a profit in the markets and they continue to do so. At the same time, there are many who tend to stay away from stocks simply because they can be far too confusing or too difficult for them to understand. There is so much information out there that you may not be entirely sure what to do with your money.
Before you decide to enter the markets, you should familiarize yourself with some common myths so that you can make a better decision. In this article, we will take a look at 7 of these common misconceptions about stock markets.
1. Only the rich can invest in stock markets
This is one of the most common myths about stock markets. At some point in our lives, we must have heard people say that they don’t invest in the markets because they aren’t rich enough. However, this is not true. As long as you have money available, you can invest. There are plenty of online stock brokers which don’t require a minimum deposit and they are often accompanied by low brokerage fees. Furthermore, you also have many promising stocks which are not that expensive, to begin with. As long as you pick your stocks correctly, you can very well end up making decent returns on your investment.The best you can do is research and there some of the finance blogs like Learn Investing where you get tips and tricks on how to invest in stock market.
2. Market predictions can be trusted
Before you enter the exciting world of stock markets, you should know that they are constantly shifting. There are numerous factors at play here, all of which are linked so intricately a change in any one of them can cause a ripple effect in the markets. Furthermore, the performance of stock markets also depends on international conditions. It is next to impossible to predict with utmost certainty how a particular stock will behave.
3. What goes up comes down
Many people believe that a stock that goes up will come down, sooner or later. However, if a company is performing incredibly well, there is no reason why its stock should not increase in price. For example, the share price of MRF Limited, as of early July 2018, is close to Rs.75,000! The scrip has been on a bull run for the longest time and the reason for this lies in the company’s performance. That’s why, instead of believing in this myth, it’s better to carefully research and fundamentally analyse the company. Otherwise, you may end up losing an opportunity of a lifetime to benefit from an exceptional stock.
4. A stock that has fallen will rise again
This is the opposite of the last myth. One of the most common misconceptions that people have about the markets is that if a stock is trading close to its new 52-week low, it will rise again. If a company’s stock has fallen from Rs.600 to Rs.150, many people will invest in this company hoping that it will bounce back again. However, the company’s shares may be down because of a serious reason. Instead of blindly jumping on the bandwagon, research and understand why the company’s scrip has suffered and see whether it is worth investing.
5. Higher the risk, greater is the reward
You must have heard this phrase several times in different contexts, but if you invest in stock markets solely based on this philosophy, you will have a bad time. The thing with this myth is that you are only hearing one side of the story. What you are not hearing is the fact that it can lead to high losses too. For example, if you invest Rs.10,000 in a company which promises to be the ‘next big thing’ without doing your due diligence on the organisation, then there is a possible scenario where you will end up losing all your investment.
That’s why, it is better to take the low-risk path and invest in companies which are fundamentally sound. Investors like Rakesh Jhunjhunwala and Warren Buffett have benefited greatly from this strategy.
6. You have to be a financial expert to invest in the markets
It is a well-known fact that stock markets are quite complex and their intricacies can be difficult to understand for a layman. However, at the end of the day, it is buying and selling of securities. There are many people who have made a fortune in the markets without having attended an elementary class in economics or finance. Trading in stocks does not require a lot of expertise. It doesn’t even need the help of a financial expert. It is a subtle art which you need to master over time.
Yes, granted that you are likely to make mistakes in the beginning but as you move along, you will find yourself navigating through the world of stock markets rather easily. There is plenty of information on the internet to help you get started with the markets. Similarly, the likes of Peter Lynch and Warren Buffett have written many books on the subject, which are well worth a read.
7. Investing in stocks is like gambling
Of all the myths that we have listed in this article, this one is without a doubt the most common stock market myth. Many people don’t like to invest in stocks because they believe that it is just like gambling. However, you should know that nothing can be further from the truth.
When you purchase a stock of a company, you are essentially purchasing an ownership share in that organisation. This means that as a shareholder, you are entitled to the assets and a fraction of the profits that the company makes, which are often referred to as dividends. One of the reasons why stock prices often vary is because investors are trying to determine how the company is performing. If the company goes on to perform well, it will be reflected in its stock price. That is why; it is possible to grow wealth by investing in companies which are fundamentally sound and are performing well. As the company grows, it will add value to the economy through its products and services.
Gambling, on the other hand, is a zero-sum game. No value is created here. It simply takes the money from the loser and hands it over to the winner. You can’t grow wealth here and for this reason, you should never confuse gambling with investing.You can find more detail about stock market here
If you steer clear of these common myths on your journey to become a successful investor, then your odds of earning a decent return on your investment will greatly improve. As we have said time and again, always research about the company you are planning to invest in, rather than blindly following the crowd. It will take some time and effort but in the end, it will be well worth it.
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