Social media isn’t just about posting pictures of a beer pong tournament anymore. There is a growing industry for online financial services like peer to peer lending sites, which created $5.8 billion in loans last year. College savings and social banking sites are also becoming popular, allowing options for people to both take out a healthy line of credit with established financial institutions such as the Aurora Bank while also pursuing additional loans. The following list accounts for five flourishing social media sites for the financially aware:
Lending Club—This peer to peer lending site works by linking together borrowers and lenders through a social media service. The borrowers pay an origination fee (between 2.25 percent-4.75 percent) and create a listing with details of what loan they are requesting. Lenders can browse the listings and choose loans that want to fund, paying a service fee of 1% of what the borrower pays. The Lending Club generated $20 million in loans in 2011, a record number that is likely the result of the Club’s focus on high credit borrowers. In fact, LC turned down about 90% of their loan applications. Their popularity also stems from their offering better interest rates than banks by about 20-30 percent, if you have a FICO credit score of 660 or better.
Prosper—The direct rival to Lending Club in the peer to peer lending industry, Prosper originally manifested itself as an eBay like auction where borrowers and lenders negotiated rates. It then developed into a business model more in the vein of Lending Club, where investors decide upon an already established rate requested by a borrower. With powerful business alliances like Fidelity Ventures and Benchmark Capital, Prosper demands a 640 credit score and charges borrowers cheaper origination fees of between 0.25 percent to 3 percent.
GreenNote—This crowd-funding social media site helps students raise money for their college tuition. No credit score is required, all you have to do is create a profile and hope to receive some charity. So far 23,000 members have signed up, donating thousands of dollars for college-bound students.
SmartyPig—A social banking site that is free, FDIC-insured and allows users to create personalized savings accounts of specific purchases. Encouraging a “save-then-spend” ethos, this site is geared toward creating actionable financial goals.
GradeFund—Another fundraising platform for the college-bound, GradeFund seeks to uplift students into the financial status they need in order to afford tuition. The site attempts to combine the efforts of family members, friends, philanthropists, corporations, and public agencies.
These five social networks are geared towards various goals, from loans to savings to fundraising, but they all demonstrate the growing influence of social media on financial planning and saving. If you’re looking to take out a loan, you no longer have to rely on just a bank. Now you have the Internet too!