All right so peer-to-peer lending that’s we’re going to be talking about in this article. What it entails, the pros of it, some very important cons that you’ll want to be aware of before you jump into this investment strategy.
What Is Peer-to-peer Lending?
It’s actually pretty self-explanatory: it’s peer-to-peer lending. So, you as a person are lending money to someone else. And, traditionally, what occurs is, “say somebody needs a loan, right? And what do they do?
They go to their bank, that’s usually what happens at least in the past, right? People go to their bank and they ask for a loan from their banker, and then the banker.
Where Do They Get that Money from?
They get it from people who put money into their savings account, and people who get CDs (Certificate of Deposit) through the bank, and they might pay them like 0.25 percent, and then they take that money and they lend it out at a four, five, six, seven percent interest rate to other people. And that’s generally how banks make money.
But with peer-to-peer lending what’s going on here is you’re cutting out the middleman, okay, so you’re sort of cutting out the bank; and we’re going to get further into that in this article. But you’re cutting out the bank, and you’re going straight from one person to the other. So, you are lending money to somebody else who’s trying to start a business, or refinance, or even pay for a wedding, or sometimes even go on vacation, and we’re going to talk about some of the risks and rewards in this article.
Something that I find to be somewhat revealing is that when you look at these peer-to-peer lending sites like LendingClub or Prosper or some of the other very large peer-to-peer lending websites that we will list in this article, it’s sort of interesting to see that many times banks are the majority shareholders in many of these companies.
So, LendingClub; the majority of lending clubs are actually owned by banks, and that’s just something interesting to think about. So, they do have their hands in peer-to-peer lending, they’re probably being pretty smart with that because I think peer-to-peer lending is certainly posing a threat to traditional banking now, and in the future, the writing is on the wall as they say.
The Future of Peer-to-Peer Lending
Lending Club started in 2006, by 2015 LendingClub had done close to 10 billion dollars in total loans, yes Billion with a B. So it’s definitely something to be thought of and sort of seen as a threat for many big banks.
Later in this article, we will share with you the Top 10 Peer-to-Peer lending platforms. P2P is an abbreviation you may see in this article, which obviously stands for Peer-to-Peer.
In this game of peer-to-peer lending, there are really two different platforms that I’m going to discuss in this article and that’s LendingClub and Prosper these are the first two peer-to-peer lending companies to hit the market
They both were started in 2006. They got approved by all the government regulators in 2008. So it is safe to say that most of the legal hurdles are behind P2P lending platforms.
Obviously, you can look at P2P as a borrower or as a lender.
Minimum Loan Minimum Loan
Maximum Loan Maximum Loan
3 or 5 Years 3 or 5 Years
APR (%) APR (%)
5.99 to 36.0 5.99 to 35.96
Fees (%) Fee (%)
Closing Fee 0.50 to 4.95 Origination 1.0 – 6.0
Generally speaking, if you’re looking for a loan you can borrow anywhere from $1,000 to $47,000 for a loan as a borrower through these companies. For example, if I wanted to get a business loan for $10,000, I would have to go onto LendingClub and then put in all of my information. They need to know your Social Security number; they need to make sure that you’re a real person and you’re not just some scammer trying to steal money from people. And once you go through that whole process then you’re signed up for LendingClub and you can get offered loans.
As an investor what you’re going to do is “say you have $5,000.00 that you want to put into LendingClub, and you can give out these loans sort of microloans, in a sense, to hundreds of different people, in this way, you are diversifying your investments and risk.
With all Lending platforms, you certainly incur risk here”. Think about a bank they’re going to be cautious about giving loans to people who don’t have good credit. If they do decide to loan money to someone with weak credit, they’re going to raise the interest rate on those people because they’re definitely riskier.
They are more at risk of defaulting on those loans and they know that, That’s what’s going to be going on with P2P lending platforms as well. You’re assuming the risk of the bank, and so, there’s going to be people who might not be able to pay off those loans. I mean you have to sort of account for that and adjust that with the interest rate at the appropriate level. However, if you are smart about it and spread out your risk like banks do you can still make a pretty decent return on your investment with P2P lending platforms.
And so that’s why with LendingClub they sort of give these different grade letterings for four different borrowers; so, for example, you have really good credit, you’re probably going to have an A grade rating but if you have terrible credit just terrible credit you’re probably going to have a rating somewhere around a D or an F. You know if your credit scores 500 you might be in the D range or even in the F range, but if you have a credit score of 800, you’re going to be in the A range. And so, you as the investor can choose who you want to lend your money to.
That’s why I would like to go with a pretty well-established company, one of the larger peer-to-peer lending sites. I would be careful with some of the startups which could go belly-up pretty quickly, but that’s just something to sort of keep in mind as you get into peer-to-peer lending because when you’re giving out these loans they’re usually anywhere from 36 to 60 months for the length of the loans. That’s three to five years, so what will these lending platforms look like?
So, for example, if you want to play it very safe you would probably lend most of your money to A and B borrowers, this way, there’s a much lower default rate. With that being said the interest rate on the loans that you’re giving out is going to be lower than the interest rate on something like a D or an F grade which is going to have an interest rate you know fifteen, twenty, twenty-five percent.
The reason for that and the reason why those interest rates are going to be much higher for the people with bad credit is that they’re going to have a much higher chance of defaulting on those loans.
The best way to sort of getting around this whole issue with defaults on loans, is to loan out money to enough people that you diversify enough to the point where it really won’t matter too much if one person defaults on their loan if you have 300 other people that you gave twenty-five dollar loans to that, will make up for a loss here and there. You won’t have to worry about that one person who defaulted on the loan.
That’s definitely something you want to consider thinking about. How much risk you’re willing to take in which letter grade you would want to go after in terms of loans. Most lenders that I speak with find the best returns somewhere between the B, C, and D ratings for the loans.
If you get into the F ratings then may see a lot of people who just won’t pay and nobody wants to deal with that, they’re going to absolutely just destroy your bottom line investment earnings.
If you stay in the A ratings, where most of those people are almost always going to pay off those loans and it’s going to be a much lower rate; can be four or five or six percent on those loans, so that’s something to take into consideration when deciding to participate in peer to peer lending. It is better than a CD at your bank, but not the kind of returns most Save Your Bucks readers are looking for.
You might be asking what’s going to stop people from taking my money and just completely running away with it, and just stealing my money, never paying me back, never sending a single penny of that money that I loaned them? Really the thing that’s going to stop them that’s going to stop 99% of people is that it’s going to absolutely destroy their credit score.
If the person who borrows money from you, doesn’t pay you back it’s going to just annihilate their credit score. It’s going to be bad; they’re going to default on those loans, their credit score is just going to plummet.
That’s what’s kind of scary about people who already have very low credit scores. If they have a 500-credit score, you can’t go a whole lot lower than that. And so that’s why I don’t load to people with very low credit scores. It is like convicting a dude or murder who is already doing life without the possibility of parole.
Generally speaking, mature people don’t want to mess up their credit scores. It’s not something that you can instantly fix. It takes a very long time to fix that, and hopefully, people who are borrowing money on LendingClub are aware of that. I think a good majority of people are aware that they don’t want to destroy their credit score and so most people will take it seriously and pay off their loans.
There are more cons of peer-to-peer lending, one of them could also be the fact that your total annual return on investment is going to have a limit. It’s going to be capped at a certain amount and that could be comforting to some people but it could also be limited to some people as well. If you are willing to do the work and get yourself educated there are many opportunities to double your money every year. That is my goal with my sport card investing and FBA Amazon sales that I do. However, the problem is both of those methods are hard to scale. With Peer-to-Peer lending platforms, I will never run out of people to lend money to, and I like that.
It is not like I have to find a Gem Mint Rookie card at below market value. There is an endless supply of people to loan money to, but the same can not be said for collectible sports cards. For example, if you’re lending money to say like C-grade borrowers well you’re going to be capped at a certain percentage.
It changes from peer-to-peer lending platform, but currently most cap out around 14%. Your actual returns will not be 14%, more like 8% or 9% because you can have a few people who are going to be defaulting on those loans. So, that’s probably the biggest downside; the fact that you can’t get quick, high returns with peer-to-peer lending it’s not easy to do that. But to say you can expect returns better than a bank CD would be a major understatement.
Now on the flip side, this could be seen as a positive because, what this is also going to mean is that, it could also sort of protecting yourself from any type of fluctuations in the market.
For example, like the stock market, if you put in a thousand dollars and you wait a year you don’t really know where that’s going to be. It could be up to thirty percent, or it could be down twenty percent, and it can certainly fluctuate a lot more than something like peer-to-peer lending.
If you’re giving out loans to B-grade borrowers here and maybe you’re getting a nine or a ten percent of annual return on those investments. Well, that can be seen as a protection of your capital, because most of those people are still going to be paying back those loans, so even if the stock market dips 20 percent in the future.
If the stock market drops drastically, or the sports card market plummets, you could still be getting a six, seven or eight percent return through a P2P Lending Platform like LendingClub.
But with that being said that also brings up another potential issue for peer-to-peer lending and just for lending in general which is the default rate. So, generally speaking, you can sort of guess how much money you’re going to make based on the default rate.
What percentage it’s going to be, but the default rate can certainly change and it can change somewhat drastically if, for example, we enter a very bad recession. So for example, if we see the unemployment rate rise like it did in 2009/2010 it was almost ten percent at that time. At the time of this writing, it is sitting around four percent but there’s certainly a lot of issues within the economy that could certainly affect these default rates.
Our consumer confidence could fall, gas prices could rise pretty drastically, and so there’s going to be a lot of variables that you want to think about before you get into peer-to-peer lending.
The default rates can certainly cut your earnings if the default rates rise pretty substantially at any given time it could certainly hurt your earnings.
So, there is one more issue that I want to bring up here about peer-to-peer lending and I’m trying to give you both sides of the story so that you can make your own decision on whether peer-to-peer lending is something that you might be interested in. An issue that some people have with LendingClub or Prosper for example is what happens if they go under?
What happens if they go bankrupt? And that’s a question that people have been asking since they started back in 2006. This has been debated. My guess is we would probably be okay because, generally speaking, common stock shareholders would be paid last and then we would be paid before them as a lender.
But what’s going to happen to the default rate if people see that LendingClub goes under? Do they think that they still have to pay the loans? And so, there can certainly be a lot of issues there. The truth is you can find any reason not to step out of your comfort zone.
Now, with that being said most of these lending peer-to-peer lending sites have a small amount of debt and most of them are cash flow positive. LendingClub, Prosper they’re both cash flow positive. I believe Lending Club actually had a hundred and fifty-million-dollar investment from Google.
I do think that they are here to stay, but that’s something that you just want to sort of keep in mind. Think about the long-term survivability of some of these lending companies and any investment vehicle. Learning to properly calculate the risk versus reward for you and your situation is a good skill set to develop.
What is my overall opinion on LendingClub, Prosper and the numerous other peer-to-peer lending platforms out there? I think it can almost always be better than putting money into the bank.
Especially, if you’re able to assume a little bit more risk, If you’re certainly depending on the money and you need that money, and maybe you just want to keep it into something very safe like CDs or your bank account. However, if that is how you felt, I don’t think you would be reading this article, or a save your bucks subscriber.
I don’t think these lending websites like LendingClub are going to be incurring too much risk if you’re generally giving out loans to people who have A ratings even if the default rate climbs a little bit. I think it’s going to be better off than putting your money into your bank account and just leaving it there, and not gaining any money on your money.
Below, you will find info and links to easily access LendingClub, Prosper, and the top-rated peer-to-peer lending platforms, I hope you check out their websites and you find this list valuable
This type of money lending is also known as marketplace lending because it matches up borrowers directly with lenders. Investors can take advantage of higher yields than most traditional forms of investing and feel good that their money is helping other people.
You’ll also find a lot of great affiliate programs doing traditional lending, including real estate lending. Here are 10 great p2p lending affiliate programs:
P2P Lending Affiliate Programs
- URL: https://www.prosper.com/plp/about/contact-us/
- Commission: 13% per loan origination
- Cookie: 30 days
Prosper is a leading p2p lending online marketplace that connects borrowers with individuals who want to invest in consumer credit. They have been helping people tackle their financial goals since 2006. Borrowers can apply for fixed-term loans between $2,000-$40,000 and investors have the opportunity to earn solid returns.
They use Impact Radius to run their affiliate program. Prosper provides their affiliates with banner ads, text links, their product catalog, and powerful reporting tools. Their proactive affiliate management team is available to assist with everything from set up to optimize your marketing campaigns.
Why Should You Promote Prosper: First p2p lending marketplace in the US, empowered over 900,000 people, competitive commission rates They are looking to partner with affiliates with audiences who would benefit from their P2P lending marketplace.
- URL: https://www.lendkey.com/refer-a-friend/
- Commission: $200 per loan
- Cookie: N/A
LendKey is a p2p student loan refinancing platform that matches borrowers with local lenders. They help borrowers easily apply for low-rate loans from lenders that prioritize people over profits. They also offer private student loans and home improvement loans.
Their affiliate program is powered by Ambassador. LendKey provides their affiliates with unique tracking links with no limits on how many people you can refer. Affiliates can share their links with friends, family, and acquaintances that can benefit from student loan refinancing.
Why Should You Promote LendKey: Student loan p2p lending, unlimited referrals, extremely high commission payouts Your referrals also earn $200 to help pay off their student loans faster.
- URL: https://signup.cj.com/member/signup/publisher/?cid=4653847
- Commission: $100-$150 per funded loan
- Cookie: 30 days
SoFi is an award-winning p2p lending community. They help people reach their goals and achieve financial independence. Their membership benefits include complimentary financial advising, unemployment protection, career coaching, networking experiences, and rate discounts on additional SoFi loans.
They have teamed up with Commission Junction to oversee their affiliate program. SoFi gives their affiliates access to professionally designed banner ads, logos, and text links. Affiliates are allowed to use generic keywords in their SEO but not their name or domain name.
Why Should You Promote SoFi: Well-known p2p lender, no hidden fees, great commission rates Affiliates earn $100 per funded personal loans and $150 per funded student refinance loans.
- URL: https://streetshares.com/
- Commission: $25 per business bond, $25 qualified loan lead, $400 per loan approval
- Cookie: 30 days
StreetShares is an award-winning financial service for Veterans and small businesses. They offer affordable, fast lines of credit up to $100,000 and up to $500,000 in contract financing. Their veteran business bonds offer a new way to invest with a flat 5% interest rate to grow your money faster.
Their affiliate program is hosted on Impact Radius. StreetShares supplies its affiliates with all the marketing materials and affiliate tools needed to start promoting right away. Affiliates can reach out to their affiliate manager with any questions or suggestions.
Why Should You Promote StreetShares? Award-winning financial solutions, Veteran owned, affordable business loans Affiliates can earn commissions when borrowers and investors are approved to join their p2p lending network.
- URL: https://www.upstart.com/affiliates
- Commission: $100 per funded loan
- Cookie: 45 days
Upstart understands you are more than a credit score. They offer smarter loan rates that are also based on your years of credit, education, area of study, and experience. Investors can take advantage of their automatic investing and p2p lending retirement accounts.
Affiliates can sign up for the Upstart affiliate program with Commission Junction. Their affiliate management team frequently updates their library of banners and text links. They also offer mobile certified links.
Why Should You Promote Upstart: Competitive personal loans, performance incentives, no cap on earnings They also offer increased commissions of $150 when you refer to 25+ loans.
- URL: https://www.lendingclub.com/company/contact-us/business-development
- Commission: $10-50 per investor, $40 per borrower, 1.25% auto refinance loans, 1.5% small business loans
- Cookie: 30 days
LendingClub is the largest online p2p lending marketplace in the US. They are transforming the banking system by connecting investors with borrowers looking for personal, business, education, and elective medical procedure loans. They have helped over 2.5 million people improve their financial health with their low rates on loans and attractive investment returns.
They use Impact Radius to run their affiliate program. LendingClub supplies its affiliates with a great selection of creatives and state-of-the-art tracking tools. Affiliates can also check out their free tutorials and tips on how to make the most out of their program.
Why Should You Promote LendingClub? Largest p2p lending marketplace, transforming the banking system, multiple ways to earn commissions Affiliates can earn commissions by referring investors and borrowers to their p2p lending marketplace.
- URL: https://signup.cj.com/member/signup/publisher/?cid=4917114
- Commission: $30 per accredited investor lead
- Cookie: 45 days
PeerStreet is a p2p lending marketplace for borrowers wanting to find short-term real estate loans. Their borrowers are real estate investors looking for capital to purchase and flip properties. They want to allow their investors to invest in real estate loans like the pros with attractive returns of 6-12% yield.
They’ve partnered with Commission Junction to oversee their affiliate program. PeerStreet gives their affiliates access to high-converting banner ads and text links. Their dedicated affiliate management team is on hand to help with everything from setup to increasing conversion rates.
Why Should You Promote PeerStreet? Award-winning real estate platform, high yield short-term loans, generous per lead commission fees.
Affiliates can also promote their numerous awards and positive media reviews.
- URL: https://lendabit.com/blog/how-to-join-our-referral-program/
- Commission: 20% of the system fee
- Cookie: N/A
LendaBit.com is a blockchain-based p2p lending platform with no intermediaries. Borrowers can use Bitcoin or Ethereum crypto collateral to help secure their loans. This allows them to remove unnecessary steps in the lending process to make the terms more attractive to borrowers and lenders.
Their affiliate program is managed on their website. LendaBit.com provides its affiliates with unique referral links and easy-to-use HTML banner ads. Affiliates can track their clicks, registrations, conversion rates, and commissions on their affiliate dashboard.
Interested in Bitcoin and crypto? Other affiliate programs pay in Bitcoin, and you can also promote cryptocurrency affiliate programs.
Why Should You Promote LendaBit.com? Crypto p2p lending, active customers eligible to join, easy to use affiliate tools It’s important to note, their affiliate program is only open to active customers.
- URL: https://www.loanback.com/affiliates
- Commission: $7.50 for Loan Forms, $15 for LoanBuilder
- Cookie: N/A
LoanBack helps you set up and manage personal loans for friends and family. Their LoanBuilder creates custom loan agreements. Their Loan Forms are downloadable blank promissory note forms. They have helped tens of thousands of people create $1.3 million of loans so their friends and family don’t have to rely on banks for loans.
Their affiliate program is managed in-house. LoanBack supplies its affiliates a wide variety of logos, text links, banners, and promotional content. Affiliates can share their links on their website, blog, newsletters, and emails.
Why Should You Promote LoanBack? Smarter personal friends and family loans, secure loans without high-interest rates, two ways to earn commissions Affiliates can also create their marketing materials to better suit their website.
- URL: https://www.bitbond.com/affiliate
- Commission: Up to 50% of Bitbond’s origination fees
- Cookie: 90 days
Bitbond is the first global lending platform for small businesses. They leverage blockchain technology to offer creditworthy borrowers affordable financing options. Investors can help entrepreneurs worldwide while enjoying solid returns from their diversified loan portfolio.
Their affiliate program is hosted on their website. Affiliates must log in or sign up for Bitbond to apply. They allow their affiliates to share their links and any of the provided banners on their blog, website, social media pages, emails, and newsletters.
Why Should You Promote Bitbond? Small business p2p lending platform, quick and easy sign-up process, earn up to half of Bitbond’s origination fees. Commissions are paid instantly to your Bitbond wallet and paid for 2 years from the user’s registration.
Affiliate Website Ideas
Now, that you’ve discovered 10 great p2p lending affiliate programs, it’s time to pick a niche to target. You could focus on no prepayment penalty P2P loans so you can get the money you need fast and pay it back as soon as you want. Upstart offers smarter loan rates that take into account more than just your credit score and offers no prepayment penalty. Affiliates receive $100 per funded loan.
Student loan refinancing p2p loans is another great niche for graduates looking to save money with lower-interest student loans. SoFi is an award-winning p2p lending platform that focuses on student loan refinancing and helps people gain financial independence quicker. They offer their affiliates $100-$150 per funded loan.
You could also promote small business p2p lending. StreetShare provides small businesses with fast, affordable loans and a flat 5% interest rate for their investors.
Affiliates can earn $25-$400 per customer they refer.
Boost Your Affiliate Earnings
These 10 affiliate programs are just the beginning of what’s possible. There are hundreds of ways to earn affiliate commissions with your website, including product reviews, top 10 lists, how-to guides, and more. But what about traffic and conversions? How do you make sure your affiliate links get clicked?
I used the affiliate training here to turn my brand new website into a six-figure income generator in less than two years. Build a business, not just a pocket-money side project!