Q: My husband wants our next loan to come from a social lending site like LendingClub.com or Prosper.com, instead of a bank. Is that safe?
A: Social lending sites can be legitimate -- and the established ones you mention are considered secure. Just don't assume they'll make borrowing easier. These services evolved with a dual purpose: Borrowers often get loans at lower rates than banks offer, and investors can get a higher rate of return than the market provides. Prosper.com, for example, uses an auction system: You request an amount at a desired interest rate, and depending on how many lenders bid on the loan, you may be offered one lower or higher than that. The trick: Lenders have to want to lend to you, so you have to sell yourself. (Lending Club -- where only about 15 percent of applications end up getting funded -- may evaluate your profile on LinkedIn or Facebook!) That said, with credit tight these days, peer-to-peer borrowing has soared. As with any contract, read the fine print and make sure you can handle the terms. Default, and the personal touch disappears; you'll get shunted to a collection agency -- just as you would with a bank.
MP Dunleavey Our financial expert, the author of Money Can Buy Happiness and mom of a 3-year-old, faces the same financial worries you do. Send her questions at firstname.lastname@example.org.