You are looking for a loan but don’t want traditional lenders.
What do you do?
Well, one possible option is peer to peer lending.
You might be wondering, “What’s peer to peer lending ?”
Peer to peer lending or, as it’s often called, P2P lending is a new type of lending that’s rapidly growing.
It allows more people to get loans and allows individual investors to invest in specific loans for certain people.
This is a win-win situation. It could also be a great way to get a loan, without dealing with any banks.
Want more information? Continue reading!
What is Peer to Peer Lending?
Peer to Peer lending was started in the mid-2000s. The two big names that were established as the P2P authorities were Prosper and LendingClub. They are still the most prominent P2P lending entities.
P2P Loans are loans that do not require a bank institution to act as a broker. It transfers funds directly from investors to borrowers via digital platforms.
It’s sometimes called crowdlending. A peer-to-peer lending situation is similar to Kickstarter’s crowdfunding campaign. It involves peer donors donating to a cause.
Basically, online lenders lend money to you for a specified amount of time and at a fixed interest rate.
And you’ll be able to use the funds any way you see fit, from business needs to traveling the world.
How It’s Different From a Traditional Loan
In a traditional loan arrangement, the bank takes all decisions as long as you have been approved for the loan. It handles all administrative and processing requirements.
With a P2P loan the platform (while you have other options, the most common choice is prosper or ) which handles the administrative work.
The cash comes from individuals who expect to be repaid via the online platform.
Both types of loans require repayment of both principal and agreed-upon interest.
Why Peer To Peer?
The biggest reason to choose a P2P loan over a traditional bank loan is convenience. It takes a lot of effort and time to secure a loan from a bank. It can take time for the bank’s to process everything.
This means that you will have to wait longer before getting your money.
The application is usually completed in a matter of minutes online using P2P.
And while interest rates can vary, depending on your credit, P2P rates usually at least beat out the interest rate of a credit card. They are, therefore, better than maxing your credit card.
You are considered a greater risk if you have poor credit. A P2P loan will have a higher interest rate than a traditional bank.
This could mean a rate of as high as 36% for borrowers who are a high lending risk. As with all loans, do not borrow from peer-to-peer lenders if your ability to repay the loan with interest is less than 50%.
Is P2P Right For You?
Hopefully, this overview will answer your initial question: “What is peer-to-peer lending !”
If you have any questions, contact now!