Willing to take a little more risk to earn 4% or more? MicroPlace, which is owned by eBay, is an online broker for microfinance investments around the world that pay 0.5% to 4% interest. Terms range from one to four years, and the minimum investment is only $20. Select the type of project and region of the world, the rate of return you want, and the term of your investment, and you’ll see a selection of projects in which you can invest. A client of Durham, N.C., financial planner Jennifer Lazarus used MicroPlace projects to create a CD ladder that is earning from 0.5% to 3% for maturities of 12 months or less. In the four-year history of the site, no issuer has defaulted.
Prosper.com has formalized the process of peer-to-peer lending. You can examine the credit quality of loans you purchase and create a diversified portfolio to minimize the risk. Although you can invest as little as $25, Joe Toms, Prosper’s chief investment officer, recommends investing a minimum of $5,000 to create a portfolio of at least 250 loans. There are seven loan grades. Top-quality, AA loans, which Toms equates to B-rated corporate loans, are yielding 5% to 5.5%; lower-quality loans pay higher rates. Residents of 28 states and the District of Columbia can invest in these loans, which usually have a three-year term.
At RSF Social Finance’s Social Investment Fund, you earn only a 1% return, but your money is lent to more than 75 nonprofit and socially responsible organizations, such as schools, a firm that keeps waste out of landfills and a company that converts weeds to eco-packaging. The fund operates like a revolving three-month CD that continually reinvests at maturity unless you direct it not to. Since 1984, the loans have had a 100% repayment rate. The minimum investment is $1,000.