A few years ago, I started loaning money to complete strangers via Lending Club and Prosper. Here are my posts after Year One and Year Two. $25 was the most I lent to any of the 30 people. I spread it around to (clear throat) diversify my portfolio. Of course, I said that with a swagger and deeper than usual voice.
I got returns of 6.72% and 5.78% respectively. Over the three years, only one borrower defaulted. So, I had to eat that, just like a bank does when someone bails on what they owe.
People who are looking to borrow money will say the reason they need the money. I tend to go with those who want the loan to pay off a high interest credit card or start a new business.
Are you more inclined to borrow than lend? You can do that too. It’s anonymous for all parties. Use Lending Club and Prosper to borrow money from regular people at a rate cheaper than your high interest credit card or a personal bank loan.
If you have extra cash, this might be a good way to help folks dig out of debt or fund other projects, while getting a better return than in a CD or savings account. Lending Club and Prosper do all the work for you. You just sign up to lend or borrow.