Sticking It to Banks is Fun!
It seems that I read a new article at least once a week concerning the panic that has set in among bank executives about peer to peer lending. Why? Because capital is the life blood of a bank’s earning potential. In case you aren’t aware, banks make their money by making loans and earning interest from them. But, where do they get the money to make these loans? From the deposits that YOU and millions of other people give to them. So, they instead of you, are making money off of your capital. They like to make you think that you’re getting a good return on your deposits in the form of CD’s and interest bearing savings accounts. But, the returns on these are measly compared to what the bank is earning. If you haven’t guessed it by now, I think banks are basically leeches. Anyway, back to my original point – if customer’s aren’t filling the bank’s coffers with their money then the banks can’t use it to earn more for themselves. The growing popularity of peer to peer lending has caused an increased amount of capital to be put into the vaults of peer lending networks and a resultant decrease in bank vaults. This is good news, screwing the bank is always fun!
Squirm Mr. Banker!
Lately, banking houses have been desperately trying to figure out ways to get involved in the peer lending marketplace. The results of their efforts are yet to be seen, but for now it is nice to watch them squirm. The probable outcome will result in banking firms buying out most of the peer lending firms, thus allowing all of that capital to be plunked right back into their hands.
How you can help
With peer to peer lending you can make far better returns than those that a bank will give you for storing your money in their vaults. Peer to peer lenders reserve the right to choose who their loan recipients will be and all the returns go back into their own pockets, just as it should be. The peer lending network does get a cut of the interest earned on your loans – usually around one percent. However, this is quite reasonable and far better than the amount that a bank would take by using your money. You as the peer lender still earn the lion’s share of the interest, typically around 9-12 percent.
So, if you’ve got extra money in your checking account or are considering opening a CD, swat your bank’s grubby fingers away and put it to work for yourself instead by becoming a peer to peer lender.
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