I first got to know about the idea of crowdfunding a few years ago after stumbling on this article at Mr Money Mustache (MMM). Looking at the ~10% annualised returns MMM received from participating in lending campaigns with The Lending Club, it did get me interested to find out more.

Especially about how they work and their value proposition.

My Understanding Of Debt-Based Crowdfunding

Basically, with the improvement of technology, many monopolies or oligopolies are getting disrupted. We have already seen how Grabtaxi and Uber are providing us with alternatives to taxi rides and crowdfunding companies are doing the same thing.

Traditionally, banks receive deposits from savers and provide loans to individuals or businesses at higher rates. Looking at how big banks have become, money lending can indeed be very lucrative. As they become bigger, the margins or spread have to be higher to support and maintain profits.

In this low-interest climate, ...