Gone are the days where financial institutions are the only option for real estate lending. Social networking sites are now on the forefront of a new peer-to-peer lending trend.  There are several variations, but the basic concept is to cut banks out of the equation and provide borrowers and lenders a safe environment to wheel and deal.  Prosper.com and Virginmoneyus.com are among the most popular sites that are specifically geared towards real estate lending.

Each site can be unique in its safeguards and services however the overall concept remains the same. Borrowers in need of funding post their specs – “$30,000 for condo in San Jose Costa Rica”. The limitation on the length of the loans and the maximum amount distributed are usually specified by the site itself. Many borrowers could find it difficult to get an entire mortgage amount for a 30 year term, however these sites provide the perfect option if partial funding needs to be obtained in addition to a conventional mortgage. After the borrower posts their needs the request can be viewed by the private lenders that are registered with the site. This allows lenders the ability to maintain anonymity and avoid being inundated with personal requests for funding.  Lenders are also provided a sense of security since most of these sites conduct credit and background checks on the borrowers.

Social lending sites have also been viewed as a legitimate means in diversifying ones portfolio.  In many cases one can receive significantly better interest rates than they would from CD’s or money market accounts.  Lenders are also given the option to only issue partial funding on a request. This is often recommended since despite the precautions that are taken there is still a potential for a borrower to default. If a lender chooses several different borrowers/loans they provide themselves an opportunity to issue different interest rates and in turn increase their profits.

Each site is slightly different in their terms and conditions and they should be thoroughly researched. Whether you are a lender or a borrower it is best to find a social networking site that meets your comfort level and caters to your needs.

Tags: costa rica, financing, mortgage, social lending

This entry was posted on Monday, May 5th, 2008 at 11:01 am and is filed under Costa Rica Financing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.