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Social Lending: A Popular Debt Consolidation Option

Created: On September 9, 2008 @ 10:48 am In

Social lending is becoming a popular debt consolidation option for many as the credit markets continue to tighten and consumers are finding it more difficult to obtain financing.

Prosper.com, one of the more popular social lending websites, recently released its usage statistics from July of 2008. 43% of the loans that funded through their service were for debt consolidation purposes.

Social lending, loosely defined, is the lending and borrowing of money between individuals. In the past, this type of lending traditionally took place between friends and family, however, new online services have made it possible to facilitate this sort of arrangement between strangers.

Using an online social lending website to borrow money can be an effective strategy for finding an unsecured debt consolidation loan, however, you will need to provide much of the same information you would to a traditional bank. The individuals lending their money want to understand what you will be using the money for and how you will be able to repay the loan.

Advantages of Social Lending

One benefit to working with an individual versus a traditional bank is the ability to tell your story. If you have a complicated employment history or credit challenges resulting from medical issues, you will be given the opportunity to explain your situation. The individuals lending their money aren’t limited by the same stringent guidelines used by banks. They can make judgment calls based on your entire situation.

Borrowing through a social lending website also has it’s advantages over borrowing from friends and family. For example, if you become unable to repay the loan under the agreed upon terms, you don’t run the risk of ruining a very important personal relationship. You also won’t feel the same sense of obligation that comes from borrowing from friends and family nor will you feel that your choice of lifestyle and purchasing decisions will constantly be under scrutiny while you still owe money.

Friends and Family

If you are able to withstand the emotional and relationship challenges that come from borrowing money from friends and family, there are many advantages to consider with that option. Utilizing your own network of people to borrow money typically results in terms that are much more favorable (e.g. lower interest rates and longer repayment periods).

If you are looking to consolidate your outstanding debt and are having difficulty borrowing from traditional lenders, you should explore the social lending options you have available.

Source:
[1] Propser.com

About the Author:
Chris Rocks is the Founder and Executive Director of the [2] Credit Advisory Alliance (CAA), a membership based organization helping those who have suffered a financial crisis restore their credit and reinsert themselves back into the credit-driven economy. Prior to founding CAA, Chris had successfully helped consumers achieve their financial goals as both a Financial Advisor and the Vice President of a Mortgage Origination Firm.

Article printed from DebtHelp.com Blog: http://www.debthelp.com/blog

URL to article: http://www.debthelp.com/blog/2008/09/09/social-lending-a-popular-debt-consolidation-option/

URLs in this post:
[1] Propser.com: http://www.prosper.com/about/media_market_surveys.aspx?t=July_2008_Market_Survey
[2] Credit Advisory Alliance : http://www.caacredit.com/