Do you recall how purchasing a car used to be? A commission-hungry salesman in coffee-stained Dockers rants about mileage, powder coating, and the nice toaster oven he will throw into the deal after he “talks to his manager”. At the same time, you spend hours roaming around a dusty lot? Welcome to internet car shopping; goodbye, buddy.
Like internet vehicle sales and that bizarre blow-up, wavy-arms dancers skip the lot, peer-to-peer (P2P) lending avoids traditional banks and credit unions. In P2P lending, investors collaborate with borrowers directly without the interference of a bank, and all transactions take place online. You won’t receive complimentary calendars or pencils, but you won’t experience any awkward “human interaction.” You can search the keyword for more info.
Peer-to-peer lending: what is it and how does it operate?
Through a “crowdlending” platform, peer-to-peer lending1 eliminates banks and credit unions from the equation. It establishes a direct route between investors and borrowers (you’ve certainly heard of Lending Club and Prosper, two of the most well-known P2P lenders in the US). Since P2P is virtually entirely done online, borrowers get access to a larger pool of possible lenders than what is accessible locally. Borrowers like the ease and variety of options, and investors can profit more without paying a bank a commission.
What purposes might P2P loans serve?
It depends on the kind of loan you apply for and the kinds of loans that your lending platform provides. Finance for small enterprises is among the most popular applications for P2P loans. The largest peer lending sites, Prosper and Lending Club, helped lenders finance $200 million in personal loans used for small company purposes, according to the House Committee on Small Business.
The loan type you’re looking for is not listed here. P2P lending is available on several additional lending sites; more on that later! Keep in mind that there are a lot of different things that personal loans can be utilised for. Among them are debt restructuring, medical expenses, and student loans.
Benefits of peer-to-peer lending for businesses
Lower rates of interest.
Although peer-to-peer loan rates might seem excessive initially, you won’t be paying the extra costs of having a real bank and staff.
In general, P2P investors don’t give a damn about a loan’s purpose. Most peer-to-peer investors wouldn’t distinguish between personal and business loans, but banks typically won’t make the distinction.
Simple to apply.
The P2P loan procedure can be completed entirely online through email or secure investor portals, including third-party confirmation and document signing.
Compared to banks or credit unions, peer-to-peer loans can be processed from application to delivery of funds in a few days instead of weeks or even months.
Can someone with bad credit use peer-to-peer lending?
Before the mid-2000s financial crisis, traditional banks tended to be wary of applicants with poor credit. If your credit rating is in the low 600s, P2P is a better option. Peer-to-peer lending improves your risk of encouraging investors who aren’t risk-averse because it puts your loan application in front of a bigger, more varied pool of lenders.