As recently reported by CenterNetworks and Prosperlending (we can’t seem to keep up with our own news), we just launched a contest on Facebook for the best video about peer-to-peer lending.

Anyone with a Facebook account can participate by making a short video and posting it in this Facebook group and on YouTube. The video that receives the most views on YouTube wins, and the winner earns $5,000 for their innovative creation. The contest will end August 10. See complete contest rules here.

We are launching this contest to invite everybody to think about peer-to-peer lending in a fun and creative way, help explain the benefits, and just spread the word. We heard today about a few entries in the making that sound just hilarious and can’t wait to see them in action! Email with any question about this contest at contests@lendingclub.com.

This is just another way to get out of debt: win $5,000 and pay off your credit card balance!

Two months ago I was talking to a friend who goes out a lot. He is never home. He was saying that all of the money that he makes is gone by the end of the month. Sometimes he even had to put two or three days’ worth of expenses on a credit card. I asked him if he knew where his money went each month. He told me he knew about the big expenses, such as his rent and car payment. After that he wasn’t sure.

One of the first steps in taking control of your finances is finding out where all of your money goes in real dollars and cents. Information is how you can control your money better and make sound decisions. In my last post, I suggested that one way to do this is to sharpen your awareness of the real value of money by paying for everything in cash for a month. There are other ways to find out where your money is going.

If all of your purchases are electronic, using your credit card, debit card, or online bill pay from your bank, you can use software to help you track your spending. Most banks allow you to download your transactions in either MS Money or Quicken format. No matter what tool you use, we here at Lending Club believe that understanding your spending behavior is a critical first step to budgeting, sticking to a financial plan, and ultimately strengthening your credit record.

To get an idea of where your money is going, you’ll want to look at your transactions over a two-month period. For an even better picture, collect the transactions for at least six months to a year. This process will reduce the impact of one-time expenses, such as a car repair.

If many of your transactions are cash-based, you will need to find a different way to track your transactions. This could mean using a small notebook or your Blackberry. You will want to keep track of the date, amount of purchase, store and expense category. Examples of categories are food, transportation, living expenses, entertainment, etc. At the end of a week or month, transfer this data to a spreadsheet. With a spreadsheet it will be easier to make charts and keep the transactions for the long term.

When my friend started to keep track of all his financial transactions, he was able to find out exactly where his money went. Knowing this information, he cut down on going out and made some other changes. This exercise allowed him to reign in his spending and catch the train to a better future.

We often talk about how person-to-person lending, and Lending Club in particular, helps borrowers obtain a 3% to 4% lower interest rate than they would get from a bank or a credit card company. These lower rates result from a more efficient process: bypassing the banks and making the money flow seamlessly between individuals (lenders and borrowers).

The average Lending Club loan rate is 10.3%, while the average rate for credit cards with a balance is 14.47% (according to the July 9th Federal Reserve G.19 weekly survey of commercial banks and finance companies).

What's that 3% worth? A lot:
• Our average issued loan to date is almost $5,000 ($4,991). Call it $5,000 for argument's sake.
• The average interest rate we are charging is coming out to 11.00%
• Over three years, a $5,000 loan @11% = interest of $892.97 over 3 years.
• Over three years, a $5,000 loan @14.64% = interest of $1,208.07 over 3 years.
• That is a savings of $315, or 26% reduction in interest.

When we talk about 3%, what we mean is actually more than a 25% reduction in interest. If loans were just regular items, we’d say you can “buy” it at a 25% discount. In the example above, the 25% discount means $315 in your pocket.

Some people have enough trouble with the credit cards they already have, let alone the additional ones that card issuers would like to send them.

If you receive unsolicited offers for new credit cards in the mail, you are likely getting them through a process called “prescreening.” Credit card companies will typically send out offers to people who meet a set of requirements, such as having a particular credit score.

While this practice is legal, receiving such offers could still lead to trouble. These letters are a favorite target of identity thieves looking to attain fraudulent credit. It doesn’t take a vivid imagination to envision the damage that someone could do if approved for a credit card with your name on it.

If you’re the type of person who might act on such offers, you may want to stop receiving them just to remove the temptation. You may also simply be tired of receiving so many of these letters. It seems that after critical life events, such as getting married or graduating from college, these letters start coming en masse.

Whatever your reason for not wanting to receive these offers anymore, the Federal Trade Commission has established methods to allow you to opt out of prescreened offers. In addition to requiring card issuers to clearly disclose how to stop receiving offers, the FTC endorses an official phone number and website to allow you to opt out. The FTC website recommends calling 1-888-5-OPTOUT (1-888-567-8688) or visiting www.optoutprescreen.com for details. Through either method, you will have the option to opt out of prescreened offers for 5 years or permanently.

Even though your request to opt out becomes effective with the major consumer credit reporting companies within 5 business days, you may still receive offers that companies were already in the process of sending you. While you’re waiting for the flow of offers to subside, Lending Club recommends that you shred, burn, or otherwise destroy all prescreened offers that you receive, just as you should do with any sensitive material that you no longer need.

We spend money on things we don’t need ($5 for a Latte). We buy the most premium option when the normal will do. We think that the bank overdraft and other fees are not that much ($25 for an overdraft fee or a late fee).

To top it off, we pay the minimum payment on our credit cards every month, yet we don’t know the actual loss we are taking when we earn .25% in our savings accounts. We don’t know the real value of money.

How did we lose the real value of money?

There are two things that really changed our perception of money: moneyless society and credit cards. Some time ago, people would take all of their earnings in the form of cash and pay for everything in cash. When they paid for all of their bills and purchases, they knew exactly where their money was going and there was no way for people to get confused about what they could buy with cash in their pockets.

When people stopped using cash and other hard currency, however, they lost their understanding of the value of money. Today, everything is electronic: bill payments, credit cards, debit cards, PayPal are but a few examples.

The other thing that changed people’s perception of money was the credit card. Credit cards in today’s world are sent to just about anyone. A good majority of cardholders do not understand what the credit card is or the value it brings to their lives.

How can you get a true sense of the real value of money?

1. Pay everything in cash for a month. This one will really open your eyes to how much you spend on the small things and on those items that you automatically pay for without thinking.

Pay for everything in cash -- coffee, gasoline, bills and food. You can also take the cash and separate it into different piles to represent how much you’re paying toward each credit card and every other bill. You might also want to purchase money orders to make your bill payments.

The bottom line is to take a break from using electronic payment methods to get a true understanding of where your money is going. Not only will this help you understand the value of a dollar, it will also help you in creating your financial plan.

2. Calculate the real value of your investments. For example, deposit $1,000 in a bank savings account and lend $1,000 through Lending Club at 7%.

After the month is up, compare the interest earned in both accounts. You should have earned 20 cents (assuming .25% return) in your bank account. Assuming the 7% rate in this example, your Lending Club account would have earned $5.82 ($1,000 x 7% / 12 month). It’s easy to see which alternative leaves you in a better position.

3. Convert the money into time. For example, maybe you want to buy the new iPhone. If you are making $20 per hour ($40,000 per year), subtract taxes (assuming 30% tax bracket, it’s now $13.33 per hour), and divide your hourly wage into the cost of the iPhone ($600/$13.33 = approx. 45 hours). Would you give up 45 hours of your life to get an iPhone?

Apply this same method for anything that you want to buy. This technique will not only help you understand the real value of money, but it will also help you control your spending.