Peer-to-peer (P2P) lending is a popular way of debt financing with a lot of a good advantage – correct capital investment gives a good passive income later. It’s a straight interaction between people, which helps them to borrow and lend money. The originality of p2p is that it doesn’t require any mediators in the process, such as established financial institutions or brokers. As the intermediary is crossed out of this process, the p2p online lending may take you more time, endeavor and risk, comparing to familiar to everyone ways of debt financing.
It is known, that the p2p lending is also called a crowdlending or a social lending.
Peer to peer lending’s ALTERNATIVE
In a traditional way small businesses or people, who want to loan money, usually get it by the help of the bank. The process of obtaining money in the bank is quite extensive – beginning with revising the customer’s credit history by the institution (no one wants to make bad investments), finishing the understanding whether the person is able to pay out the debt in the future. If everything is okay, the bank will set the charged on the mortgage interest rate for the person or business. The situation with the peer-to-peer lending goes other way round. For those people, who have a poor credit history or who want to avoid paying high interest rates because of this, our partner www.grupeer.com advises to use the method of peer to peer lending – another accessible way of borrowing money.
On peer to peer lending sites, loans to borrowers are taken from investors. The depositors usually have a will to lend their money, therefore they set such interest rate, which can be suitable both for them and the person who borrows a loan. On a peer-to-peer online platform the investors can view various borrowers’ profiles and as a result – to freely decide whether to give a loan to a particular borrower or not. A borrower can be given either the full amount of the loan or just a part of it even if he asked for a full sum. If the amount wasn’t payed fully, a borrower can get money in the peer lending marketplace either from a one or a few people. In p2p lending if the loan was taken from different investors, it should be payed separately to each lender every month.
As I have said, exactly affordable interest rates unite lenders and borrowers on peer to peer lending websites. For those people who lend money, giving loans to borrowers affects their income with an interest rate – so the lenders can often get even more money than they get through savings vehicles – as saving accounts and CDs. Also, the investor can get a bigger investment return than he gets from his borrower’s interest payment from the stock market. The other side of the coin is that p2p loans provide more opportunities to borrowers – for example, financing that borrowers might not receive in common financial institutes. Obviously that comparing the interest rate in the bank and in p2p lending, a borrower gets a better one in peer to peer lending.