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Help me give away $2,000 in scholarships using P2P lending — by this Monday, 6/11

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[Update]: Please join these two Facebook groups *today* (Monday, 6/11) in order to help iwillteachyoutoberich readers win two $1,000 scholarships. Details below.

Summary of this post: Help me give away $2,000 in scholarships by joining two Facebook groups by this Monday, June 11th.

More detail: P2P lending lets you lend and borrow directly from people based on trust (e.g., Prosper.com and LendingClub) with insanely better interest rates. LendingClub is a new organization that I’m interested in. If we have the most people join the LendingClub Facebook group by this Monday, June 11, we’ll win $5,000.

If iwillteachyoutoberich readers help win by joining the most, I’ll give away a $1,000 scholarship to a college student who reads iwillteachyoutoberich, a $1,000 scholarship to a recent grad, and I’ll loan out $1,000 using LendingClub. (I’ll keep the other $2k to pay the taxes / save / go to Vegas.)

To help win…

That’s it!

More details, along with what I spoke to the LendingClub CEO about, below.

* * *

I just ran across something really interesting and I’m encouraging you to give it a try. Many of you have heard of Prosper.com, which lets you loan and borrow directly from other people. You get higher interest rates because you’re going direct and bypassing the bank marketing, security, and other infrastructure costs.

LendingClub lets you borrow and lend money directly to people in your own network. I spoke to Renaud Laplanche, the CEO, about his model. “We can provide a 3% better return by cutting out the middlemen activities that money banks spend on their supply chain: security, bank, real estate, marketing to get the deposit and then to spend the loan.”

In other words, because it’s direct, they can offer better returns. Check it out (my explanation below):

betterrates

To lend money:


lending-rates

To borrow money:

borrowing-rates

Now I’ve written about teaser bank rates before. To be really clear, LendingClub is not a bank and they don’t offer FDIC insurance. If you lend, you could lose your money (although they do credit checks and report to credit bureaus). If you’re going to lend or borrow, I would start off with something modest like $100 and see how it goes. But I’m more excited about these innovative new models that cut out the middlemen and let us play around with small amounts of money. For me, it’s not really about the extra $20 or $200 I could make using these models, but playing around with a new model that seems interesting and promising. 5 or 10 years from now, maybe P2P lending will seem like a no-brainer.

I asked Renaud why anyone should use LendingClub. “Launching on Facebook was, for us, a way to make that point very clear,” he told me. “We want people to borrow and lend based on trust. You have networks, you have groups, and we can match people who are not only friends, but friends-of-friends or belong to the same network.” What kind of network, I asked? “Well, you have fellow alumni, people in the same geographical network, the same professional network…all of these things make you much more comfortable, that you’re not complete strangers.”

Renaud noted that if you lend a bank your money (i.e., put it in savings), the high-interest ones pay you about 5%. The crappy ones pay you 0.5%. But the banks then turn around and charge about 12% for personal loans, giving them a huge 7%-11.5% spread on your money. He added that the default rate for banks (or the amount of people that don’t pay back their loans) is less than 1%, “so why are they charging so much?”

What to do

A group on Facebook is running a promotion to get people interested in LendingClub. You don’t have to buy anything or even sign up (although I would encourage you to poke around). If we all join two groups on Facebook, we could win $5,000, of which I’ll give away $1,000 to a college-student iwillteachyoutoberich scholarship, $1,000 to a recent-grad iwillteachyoutoberich scholarship, and I’ll loan $1,000 on LendingClub and report back on how it went. I’ll keep the rest to pay taxes / save / travel.

Note: I’ve already set up an account through LendingClub and as soon as it’s verified, I’ll be loaning $500 through the site to test it out.

Here’s how can help iwillteachyoutoberich readers win $5,000:
1. First, join my facebook group, IWillTeachYouToBeRich P2P lending = reduce stupid bank fees
2. Then join the LendingClub facebook group

That’s it!

Note: You must join both! By joining both, they can see who sent the most people to the LendingClub facebook group.

Need more info? Check out the LendingClub web page and their terms of lending. Remember, we have to have the most people join both groups by this Monday, June 11th.

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25 Comments on "Help me give away $2,000 in scholarships using P2P lending — by this Monday, 6/11"

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Emma Seaber
Emma Seaber
9 years 3 months ago

Now then, how do you decide which college stuent gets the $1,000?
It’s my birthday on Saturday. Pick me.

Enrique
Enrique
9 years 3 months ago

Ramit:
How would they know, you send us?

Enrique
Enrique
9 years 3 months ago

o.k. I joined both clubs.

Makam
Makam
9 years 3 months ago

Me too!

David Wilson
9 years 3 months ago

Signed up for both groups. Should we be trying to invite our friends to make the group bigger, or is this just for IWTYTBR readers? So cool of you to be doing the scholarships! I’m also quite interested in learning more about P2P lending, seems like a good deal for both parties. Be sure to update us on how that $1000 experiment works, if you wind up winning.

Caitlyn
Caitlyn
9 years 3 months ago

I’ve joined ’em!

JR
JR
9 years 3 months ago

Joined both.

Jay Neely
9 years 3 months ago

Hi Ramit,

I just wrote a fairly extensive overview of social lending sites on my blog, including both LendingClub and Prosper. I just joined both your Facebook groups, in my post I pointed out that social lending has the potential for a significant cultural impact by showing students what they can do with their money other than spend it on themselves.

If you’re interested in reading, the entry is “Small Loans, Big Bucks: The World of Social Lending”:
http://socialstrategist.com/2007/06/08/small-loans-big-bucks-the-world-of-social-lending

Best,
Jay Neely, Social Strategist
http://socialstrategist.com

JW
JW
9 years 3 months ago

I joined the group about having attempted to ford the river only to endure the deaths of my [expletive deleted] oxen, but I don’t suppose there’s a grand in it for me on account of that.

Shak R
9 years 3 months ago

Just joined both groups — here’s to hoping we’ll win.

Will have to do more research on Lending Club later on, but it does seem pretty interesting.

Lee
Lee
9 years 3 months ago

I’m majoring in rocket science, pick me.

MissJackson
9 years 3 months ago

DONE

Andy
Andy
9 years 3 months ago

How about purchasing a REIT instead of lending in this environment. still get a 6% div without the default risk you assume in this situation.

Jim
Jim
9 years 3 months ago

Done… and Iwillteachyoutoberich looks way out in front so far.

paul
paul
9 years 3 months ago

So by joining these two groups, you will randomly select 1 person to give the $1,000 to?

Stefan Paszlack
Stefan Paszlack
9 years 3 months ago

Just joined! Awesome work, truly an inspiration to young people.

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[…] I Will Teach You To Be Rich – Personal finance and personal entrepreneurship for college students, recent college grads, and everyone else. Featured in the Wall Street Journal and New York Times. « Help me give away $2,000 in scholarships using P2P lending — by this Monday, 6/11 […]

Rex Dixon
9 years 3 months ago

Thanks for the great promotion of Lending Club!

Rex

Josh
Josh
9 years 3 months ago
Is there anything to keep you from arbitrage-ing the bejeezus out of this? Perhaps they do not allow any single SSN to be both a lender and a borrower? Assuming you have a good credit score, you can borrow money at a good rate, and loan it at a bad one. Assuming the loan terms are the same, the person with the bad rate will just pay the initial lender back their money and you keep the slice in the middle. I suppose there is inherent risk. However, if it works out, you make interest on an undetermined amount of… Read more »
Mike
Mike
9 years 3 months ago

Ramit-

What are your thoughts on this website vs prosper? I have tried to borrow money a few times on prosper and it never seems to work. – I haven’t tried to lend yet there

Tim
Tim
8 years 11 months ago

What ever happened with this?

Seetstah
3 months 25 days ago

There are some fascinating cut-off dates on this article but I don’t know if I see all of them middle to heart. There is some validity however I’ll take hold opinion till I look into it further. Good article , thanks and we would like more! Added to FeedBurner as effectively http://pcslotsonline.ru

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