Online social lending sites are gearing some of their services to students in need of financial aid. And while this is a fairly new practice, it is worth taking a look at if only to have more back-up options in case other sources don't pan out.

Advantages

Students can choose from a variety of services available to them as there are several sites that have already established credibility in this line of business. Currently, some the major players in online social lending are:

- www.lendingclub.com - The Lending Club allows qualified applicants to borrow as much as $25,000. Loan fees may go between 0.75% to two percent depending on the borrower's credit score.

- www.prosper.com - At Prosper, applicants can borrow anywhere from $1,000 to $25,000 although the average amount of loans they've provided is $7,000. Prosper takes out one to two percent from the principal as loan fee.

- www.virginmoneyus.com - It usually takes Virgin Money one to three days to facilitate transactions. The average interest rate on loans is 6.5 percent.

- www.zopa.com - Zopa doesn't charge transaction fees and turnaround is also fast.

The sites have a number of ways to help you raise the money that you need. Some sites provide services that are suited to family loans (Virgin Money). Some, like Prosper, facilitate funding by providing lenders a venue where your business is "auctioned." You indicate how much interest you can afford to pay and lenders bid down that rate to compete for your business. For students, this is an extremely appealing option as there is a high potential of lowering interest rates to six percent or lower.

Lenders are able to promote their services as well as expect to earn a respectable profit out of these transactions. There is also the added "feel good" factor of being able to assist a student in getting an education.

Drawbacks

As with all other loan schemes, there are disadvantages to this program. Students aren't guaranteed that their loans will be funded. Furthermore, some lenders may charge higher fees than usual. Loan payment terms and other conditions associated with the loan may also turn out to be unfavorable to the borrower. Some may not allow you to postpone your payments after graduation while others may offer short payment periods.

Where to Go from Here?

Because of the still-unpredictable nature of this particular industry, it is recommended that you try to review all federal loans more thoroughly. Many federal student aid programs offer competitive rates that are really some of the best around.

If you do decide to borrow money from online lenders, make sure to evaluate all the sites just as thoroughly. If you have questions or are in need of clarification, then by all means, get in touch with officials from these online lending firms to get a clearer view of your choices.