Loan Money to a Struggling Business: Microlending is Changing Lives All Over the World

What is “microlending “? It’s the extension of small loans to entrepreneurs in developing nations. There is no interest charged, but the entrepreneur is expected to repay the loan fully within a predetermined period of time. Worldwide, there is a 97% repayment rate. This system has changed the lives of thousands all over the world. The Nobel Peace Prize in 2006 was awarded to Muhammed Yunus, the founder of the Grameen Bank, for their efforts in micro-lending.

Now, you can become a banker, funding specific entrepreneurs thanks to the website Kiva.org. The Kiva organization works with groups in the entrepreneur’s home area. The local organization interviews the applicants, evaluates their business plans, and determines their readiness to accept a loan. Then the entrepreneurs’ information is given to Kiva and listed on their website. That’s where you come in.

How you can become a lender in 3 easy steps:

  1. Take a look at the entrepreneurs in the Kiva.org website. Search for a particular area of the world, a specific gender or even a certain industry you want to support. Each entrepreneur’s page includes a photo, their business plan, a brief biography. Included is how much money they are seeking and how much has been raised so far.
  2. Select your entrepreneurs: lend as little as $25 to a single entrepreneur. Spread out $100 amongst several individuals to diversify your portfolio.
  3. Deposit your funds to Kiva using Paypal. You’ll be given the opportunity to make an optional contribution to the Kiva organization itself at this time. Remember that unlike other organizations, 100% of your loan money goes to the entrepreneur, so Kiva.org needs financial help to keep its offices and staff running.

Now you are a Microlender! What does this mean for the entrepreneur you selected? Once the entrepreneur’s loan has been fully funded, Kiva.org makes a bulk payment to the local support organization in the entrepreneur’s area. The money is quickly dispersed and put to use.

Over the specified period, the entrepreneur will make repayments. When the loan is completely repaid, you receive your investment back.

Once the loan is paid back, you can choose to cash out your balance and receive your money back, or you start the process again, and reinvest the money in another entrepreneur.

Kiva provides a “portfolio” to display where all of your funds are directed, and updates and photos are added to the journal of each entrepreneur describing their successes as they begin or expand their businesses.

How to Avoid Mortgage Fraud: Knowingly or Unknowingly, Misinformation is Illegal

The temptation to report inaccurate information to qualify for a loan haunts many would-be buyers. During the height of subprime lending, some lenders even specialized in these types of loans, now termed “liar” loans. While some buyers knowingly defrauded lenders, many buyers were tricked into declaring false information via a loan broker or other lending personnel.

Defining Loan Fraud

Loan fraud can be many things, but the most common is false reporting of information to obtain a loan. The fraud can be lender driven or it can be consumer driven. As loan regulations tighten, both consumers and brokers have incentive to falsely report stated income, loan purpose, or even a social security number to obtain loans.

While the consumer motivation may be obvious, many borrowers are unaware of the pay structure for brokers. The more loans brokers can obtain for consumers, the more money they are paid. It is in their best interest if their customers qualify and take out loans. This cuts across industries as well, although the practice is most prevalent in the housing industry.

Borrower Beware

Loan fraud falls squarely on the consumer. While the most heinous mortgage offenders do get caught, consumers have the most to lose. In the United States, loan fraud is a felony resulting in large fines and even possible jail time.

Aside from the legal ramifications, loan regulations are in place for a reason. Consumers who are not able to legitimately qualify for loans probably should not receive them. Most consumers who are turned down for loans already have significant debt or have had previous issues managing debt. Furthermore, the easiest loans to fraudulently qualify for have high interest rates and stiff penalties for missing payments. Many of the consumers who falsely report information default on their loans because they just could not afford them.

Avoiding Loan Traps

The best way to avoid unknowingly reporting false information is to read over every document that needs to be signed. If the documents seem confusing or incorrect, do not sign them until they are corrected. Never take a verbal explanation or sign anything on someone’s word.

Avoid deals that seem too good to be true. If a consumer gets turned down by four banks, yet the fifth bank says it can work something out, that consumer should be suspicious. Additionally, if a situation feels uncomfortable, take the paper work to another broker. Getting a second opinion may take time, but it could save buyers tremendous headaches in the future.

The current subprime mortgage issues are partially a result of mortgage fraud. Many consumers who fell into the fraud trap are now losing their home and all of the equity they put in to it. Being honest is the smartest thing a buyer can do when it comes to loans.