What is Peer to Peer Lending- Everything You Need to Know

What is Peer to Peer Lending- Everything You Need to Know

by Rohan Mathew

Are you among those who are searching for an alternate investment strategy? Are you tired of uninspiring interest rates? Or are you tensed about the highs and lows of the stock market? You can look at perfios peer to peer lending (P2P), if your answer to any question is yes.

Further reading of the article will help you comprehend better.

What is Peer to Peer Lending? 

As the name suggests, P2P enables people to send money to other individuals or businesses without following procedures like any other financial institutions. It is that type of crowdfunding that matches the needs of borrowers and lenders. For industry owners and small businesses, peer to peer lending has advantages compared to the traditional methods of borrowing. It is a more preferred option as a method of financing. People do not have to go through a lengthy chain of intermediaries. 

It works by connecting borrowers directly to investors. The investor decides the rates and terms of condition and initiates the transaction. An investor opens an account and deposits the money that will be disbursed as loans. The loan applicant profile is then assigned a risk category and the amount that the applicant has to pay as interest. The process can be handled on the website, can be automated, or operated by an individual. P2P websites also have some specialised features for various kinds of businesses.

Benefits of P2P Lending

Undoubtedly, technology offers added benefits over traditional methods. Similarly, peer to peer lending gives the following services as an alternative means of financing. 

  1. P2P offers custom made offers

No matter what your requirements are, P2P gives you a custom made solution. Whether it is from a modern makeover to your home or for your new car, a personal loan can be helpful. P2P websites offer different options for your unique needs and make available tailor-made solutions.

  1. Fast online application

As P2P functions entirely online, the procedures are fast and convenient. From application to execution, each step is quick and hassle-free. It is suitable if you want to secure loans urgently. 

  1. Lower interest rates

All of us know that bank interest rates are usually high. With peer to peer lending, borrowers can access loans at lower interest rates. As investors directly provide money to the borrowers, and there are no middlemen, there is no extra cost involved. 

  1. Initial borrowing does not affect credit score.

Initially, you can get a personalised quote that will not affect your credit score. When you enquire about a loan, investors search for your credit scores. These scores determine the affordability of any prospective loan that you will be offered.

  1. P2P provides a platform to traditional lenders

Many people have money to invest, but they do not get any platform. These traditional lenders get to explore an all-over new place in the form of peer to peer lending websites.  

  1. You need not know the lender.

P2P websites are simple to understand. And unlike banks and financial institutions, you only need to know the website and deal with it. Although you take a loan from individuals, you need not personally contact them. Your relationship is limited to only the lending and borrowing.

  1. You need not provide collateral.

Since these loans are unsecured, you need not have to keep any collateral. You can keep your personal property free. It also ensures that the application process is uncomplicated. 

  1. Flexibility 

The loans under peer to peer investing are more flexible than other methods. You can settle a payment anytime you want without any extra costs involved. To suit your finances, you can change your monthly settlement amount too. 

  1. Faster turnaround time

Banks take a lot of time, and disbursing loans are long, peer to peer loans are offered easily. The investor checks your profile, your credibility score, and lends you the money. It only takes 24 or maximum 48 hours after the borrower’s verification. 

  1.  Easy availability

Banks have so many customers who apply for the loan. You have to wait for so long before your chance comes. Whereas, on a peer to peer lending website, there are so many lenders. You only have to register as a borrower, and your loan will be sanctioned. 

Peer-to-peer lending and investing is a new term, but it still has a lot of reliability and credibility. It allows people to rotate money and earn from that. Traditional lending used to be a not very famous either much-preferred option of borrowing. But with the advent of P2P, many investors and borrowers earn a lot of benefits. It can become a reliable income stream if you want to get into it completely. 

Every coin has two sides. Likewise, peer to peer lending is also not without risks. But it is on you; you must research the platform and then take steps. 

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