In today's slowing economy, many Americans are caught between rising food and fuel prices and plummeting home values. And, since the credit industry is struggling as well, loans are harder than ever to come by.
In fact, unless you've got a stellar credit history, you may not be able to borrow money from traditional sources like banks or credit unions.
Thanks to the networking power offered by the Internet, borrowers without sturdy credit histories who are in need of money have an option they didn't just a few years ago.
Peer-to-peer lending allows regular people to borrow money from other regular people - sometimes at lower interest rates than are available from banks or credit unions.
Several Web sites offering peer loans have sprung up in the last few years.
Here's how they work:
Peer-to-peer lending sites can be an excellent venue for loans between family members and friends - in fact, some sites are specifically designed for loans between people who already know each other.
Lending through the established forum of a Web site helps eliminate any awkwardness or relationship strain that can otherwise result when loans are made between friends.
And even those who have never met the person from whom they're borrowing (or two whom they're lending) have noted that loans between individuals come with a heightened level of responsibility.
Many people, it seems, find defaulting on a loan from a faceless institution much easier than defaulting on a loan from an individual person. Plus, for investors, lending to peers can offer higher returns than savings accounts or the stock market.
Like anything else, though, peer lending has its negatives. Critics have cited the following as some of the biggest drawbacks of peer-to-peer loans.
The above summary of peer-to-peer lending is by no means all-inclusive and is not legal advice. For the latest information on peer-to-peer lending, speak to a bankruptcy attorney in your area.