Peer-to-peer lending websites have been around for over a decade, cutting out the middle-man so you can earn higher rates as a lender and likely lower rates as a borrower. These lending websites have been growing around the world and the peer-to-peer lending industry continues to attract new companies.
As a small investor, it has never been easier to make tiny portions of loans ($25) to consumers and small businesses where you can reasonably earn 7-9% interest on your money. Get paid interest and principal, every month, just like a bank does. As in any active investment, the more you educate yourself then this type of investing will become less risky for you. For example, it is more prudent to invest in a loan with a high credit rating than a loan paying a very-high rate that quickly defaults.
There are two large companies for consumers, Lending Club and Prosper, and there are many sites devoted to education on peer-to-peer lending, such as LendingMemo.com. Two large companies making peer-to-peer loans to small businesses include Lending Club and Funding Circle. I started with small portfolios at both Prosper and Lending Club, and would also advise further diversifying your loan portfolio with small business loans as well.
When banks are paying nearly nothing for savings accounts and certificates of deposit, it is great to bypass them and access borrowers directly to earn far more interest with a little education and effort.