Getting Loans from Your Peers (and Parents)

Getting Loans from Your Peers (and Parents)

By Brandon

Thinking about financial aid probably isn't high on your list of Super Amazing Things to Do. But as painful as might be, it's important to figure out how you're going to pay for college—especially these days, when many banks have completely shut down their student lending programs.

If the regular assortment of federal and state student loans do not sufficiently cover your tuition, you might be scrambling for another way to pay. One option to consider: peer-to-peer lending.

Peer-to-peer lending, sometimes called social lending or person-to-person lending, allows individuals to borrow from other people, including friends and family (as opposed to borrowing from a financial institution). It's a great and easy way for your parents, friends, and well-wishers to get involved with helping fund your education. And because of online technology (is there anything the internet can't do?), individuals can borrow from dozens or hundreds of people they've never met.

Peer-to-peer lending received some attention a few years back when the now-bankrupt company My Rich Uncle offered a 1% discount on Stafford loans. Since then, several new companies, including one backed by Richard Branson's Virgin Group, have risen to fill the void. They may provide a good alternative for students unable to find traditional sources of student financing, and also offer a great way for friends and family to invest in a
student's future.

A few examples for further research:

1. Prosper - www.prosper.com

2. Loanio - www.loanio.com

3. Fynanz - www.fynanz.com

4. Green Note - www.greennote.com

5. Lending Club - www.lendingclub.com

6. Virgin Money - www.virginmoneyus.com

7. VaZooma! - www.vazooma.com (coming soon)

While peer-to-peer lending should not be considered a first option for paying for college (and certainly not a replacement of any of the federal loan programs), it should definitely be a part of any comprehensive funding plan employed by a student facing exorbitantly high college costs.

Got a question for Brandon? Email him at advice@sparknotes.com.

Topics: financial aid, peer-to-peer lending

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