Peer to peer lending business model (i.e. Lending Club)
This is all answered in the prospectus. The money not yet invested (available/committed to a note but not yet funded) is held in pooled trust account insured by FDIC. Money funded is delivered to the borrower. Lending Club service their notes themselves. Read also my reviews on Lending Club. The best description of P2P lending process I saw comes from the SEC proceedings. They are very careful about naming things that are happening in the process. Prosper got back to business after this order, but the paper describes succinctly how Prosper worked when its notes haven't yet been registered by the SEC. These materials contain a lot of responsible comments on how crowdfunding, including P2P lending, works.
"wrong! people create ""money"" by lending it to the banks....  Banks are effectivly just exchanges between depositors and lenders, i.e. an IOU exchange.  When you deposit $1000, you LOAN the bank $1000. AND the normal way you deposit $1000, is by an IOU of $1000 by someone else like your employer, NOT by showing up in the bank with cash.  (NB: checks are IOUs)  The issuing/central bank do occationally create money, if the normal banks have more customers wanting to borrow than lend. However, that source of money may be raised by the central bank issuing bonds rather than new money." borrow money from the Central Bank Wrong premise. They cannot borrow as much as they want and they cannot borrow without collateral i.e. government debt instruments they hold or any other instrument with value.  And banks don’t have unlimited collateral to borrow against.  Secondly central banks aren’t in the business of lending unlimited money. The more money they lend out, the more is the money supply which stokes inflation which will eventually lead them to stop lending. At any point of time they want a certain amount of money movement, so they can control inflation and interest rates within an agreed limit and as limited by their economy. No sane central bank would want to stoke hyperflation by printing money at will e,g, Helicopter money. So the only other way for banks is to accept deposits from private individuals. You can also argue that banks make money by connecting lenders and borrowers and make their profit by being the middleman without using their assets. So you can say they are making a profit with the minimum usage of their capital. Albeit they have the central bank looking over their shoulder to police their behaviour. While some banks do charge fees for keeping deposits Yes but many provide certain extra services for which they charge. That is how they differentiate between no fee accounts and fee paying accounts. To what end would you want to break the law? Why would you think it is beneficial to you in any way? The reason for these limitations is to protect people who have no financial reserves and are not sophisticated investors from making dangerous and risky investments with the little money they have to invest. You need to remember that there's no guarantee of principal with these loans and the rate of default is pretty high. From my own personal experience with Lending Club (and I've only invested in A and some B-rated loans) - rate of default is about 10%. This may be a nice exercise in microlending - but if you want to put all your savings into this, you're taking a huge risk. Risk which is completely unjustified since not only the returns are pretty low (again - from my aforementioned experience: <6% APR, you take higher rate loans - you get higher rate of defaults), but they're also taxed as ordinary gains. Why would you not, instead, invest in a more conservative bond or bond/stock mix fund which will pay you dividends that will get preferential tax treatment and appreciation would be subject to capital gains tax? No reason. And the limitation on who can invest in Lending Club is there for exactly this purpose - to weed out people like you who have no idea of what they're doing. My equities portfolio breaks down like this: (I'm 26 years old, so it is quite aggressive) Additionally, I have a portfolio of direct real estate investments I have made over the past 4 years.  I invested very aggressively into real estate due to the financial crisis. As a result of my aggressive investing & strong growth in real estate, my overall asset breakdown is quite out of balance. (~80% Real Estate, ~20% Equities) I will be bringing this into a more sensible balance over the next few years as I unwind some of my real estate investments & reinvest the proceeds into other asset classes. As for the alternative asset groups you mentioned, I looked quite seriously at Peer to Peer lending a few years back. (Lending Club) However, interest rates were quite low & I felt that Real Estate was a better asset class to be in at the time.   Furthermore, I was borrowing heavily to fund real estate purchases at the time, and I felt it didn't make much sense to be lending cash & borrowing at the same time.  I needed every dime I could get a hold of.  :)  I will give it another look once rates come back up. I've shied away from investing in things like actively managed mutual funds, hedge funds, etc ... not because I don't think good managers can get superior returns ... rather, in my humble opinion, if they DO get above average returns then they simply charge higher management fees to reflect their good performance. Hope this helps! i work at a bank. if a private company that we've never heard of wants a loan, we will be more hesitant than if it were a public, household name covered by equity research analysts. requires more due diligence on our part. if they get s&amp;p or moody's ratings, that makes us more comfortable. the company wants the loan more than we want to lend to them, so in my mind, they should be the one paying for it.  i agree that this creates a conflict of interest, and recognize that conflict when using the research. I haven't heard of these before!  (And I'm on the board of a Credit Union.) The 0.99% on loans is great.  It's especially great on a used car: the steep part of the depreciation curve was paid by the first owner. The network probably have a business relationship with the credit union.  Credit unions do indirect lending -- approval of loans that happens at the point of sale, which then the credit union gets as assets. Depending on the cost of that program, it probably won't hurt.  Your credit union wants to keep your business, because they know that you have a lot of options for where you bank and where you get loans. Loan Provider Company in India  http://tirupatiinvestservices.com/ We are best Loan Provider Company with flexible plans of returning payments. We give short tenure loans to long-tenure loans. Our Loans are provided for Personal Development, Business Development, Home Development, Mortgage Loan etc. We are among the trusted company in India. We have established our office in Gujarat, Maharashtra and West Bengal. We have been serving in this industry from last 25 years and we are reputed company in the finance sector. "Actually sounds like an interesting concept for a business, potentially! (grin) You know, depending on where you live and how big the market is, you might see if there's a local ""concierge"" service.  These are companies that will act like personal shoppers/assistants for you in all kinds of ways.  I can't speak to the quality of their services or the pricing they use, but it would be a great place to start. I'm sure you can find listings of them on the web."