Most people have heard that in this present economy banks are not lending. Both business and individual borrowers alike have been impacted by the lack of financial resources available. In fact, many credit card users have experienced unprovoked increases in interest rates, decreases in credit limits, even when their payment history has been stellar and there are significantly lower viable credit offers in our mailboxes. Unfortunately, recent reports do not show this trend ending soon. Welcome to the new lending economy.

The real problem is that financial resources are still necessary for our economy to rebound by both the business person and the individual. So where does one turn to when the banks have all but shuttered their lending doors? Many are turning to peer-to-peer (P2P) lending as an alternative-lending source.

How does it work?

P2P lending is a non-traditional financial solution for borrowers who are looking to fund their projects. In most cases a borrower can request a loan of between $100 and $25,000, and in some cases specify the maximum interest rate they're willing to pay. The ones that I found are available online and loan requests are submitted electronically. Lending criteria through the P2P site allows a potential lender to evaluate hundreds of borrowers, who explain why they need a loan, and provide a credit history and a debt-to-income ratio. The borrower’s full personal and financial information however is shielded from view.

Who can apply?

Anyone can apply as long as you meet minimum application requirements. Borrowers seek loans for a variety of reasons, such as opening businesses, paying off hospital bills or even funding medical procedures like braces for a child. Presenting a solid case for the loan request by telling your story is important in getting funded.

What are the benefits?

For many individuals in this present economy P2P lending allows the opportunity to find financing where they would have otherwise been turned down by traditional lenders. It allows the borrower to interact with real people who lend for a range of reasons other than just for profit. It can also assist potential borrowers in building a credit history for the future.

Where can I find peer-to-peer lenders?

Prosper Marketplace is one of the first and the largest P2P lenders, it has been in business since 2006, has over 950,000 members and to date has funded more than $194,000,000 in P2P loans starting at $1,000. Prosper pioneered peer-to-peer lending, which allows people to invest in each other in a way that is socially and financially rewarding. Prosper uses an auction type model that allows potential lenders to bid against others to fund your loan.

Prosper also offers investment opportunities for lenders to build an investment portfolio that could potentially earn six percent to 16 percent based on investment risk. This is in addition to the lender’s ability to bid on individual loans and trade loan notes that they may already hold. New lenders can get started with Prosper and P2P lending with as little as $25. As always be sure to do your due diligence before making any investment. Go to www.Prosper.com for more information.

Bottom line, if you have been turned down by traditional lenders or are looking for an alternative to approaching banks for financing your next project you may want to consider P2P lenders. In this new economy you may find that peer-to-peer lending is the new tradition in loan funding.

© 2010 Ask Yvon is a written by S. Yvon Harper for Focus on Finance, LLC - (513)383-0427. All rights reserved. Contact or questions at www.FocusOnFinanceOnline.com for help in getting personal with finances. Listen online at www.BlogTalkRadio.com/YvonSpeaks. Readers are strongly urged to consult with a qualified legal or tax advisor to analyze your specific financial situation before application of any advice from this column.