What is Peer to Peer Lending – P2P Loans

Almost everyone needs to borrow money at some point in their life. It’s usually an inescapable option and one that carries the potential for risks and stress. Your financial standing is important, and you deserve to be able to get the resources you need without risking your stability with your money.

A great alternative to traditional bank loans and payday loans is a peer to peer lending. It’s growing in popularity as the process becomes easier, safer, and known more widely as a valid option for borrowing. It’s a way to mutually benefit without going through banks or unreliable websites.

What Is Peer To Peer Lending

Otherwise known as P2P lending, the process is coined right from the way it sounds. Instead of going through a bank or financial assistance company that specializes in loans, you work with an individual who wants to invest extra money into loans. You receive their money for a cost and pay them an interest in addition to the full amount back.

Think of it like borrowing money from a friend, but with a contract and an outside agency to help connect you with this friend. It’s a great way to move away from the risks that banks pose as well as other complications associated with borrowing from big companies while also giving investors the opportunity to make some extra money.

Is Peer To Peer Lending A Good Investment

Like anything online when it concerns your money, it’s good to be skeptical. On the outside, P2P lending sounds a little scary. You’re taking a stranger’s money and giving them extra back in return, all relying on a third-party to moderate the transaction. It’s just as scary if you’re on the lending side of things, too.

Yikes, right?

Before you give up on the idea, take the time to consider the benefits that P2P investments can provide to both borrowers and lenders. We’ll take a look at both.

If you’re looking to borrow money, P2P loans can be a great way to bypass the frustrations bank cause. Here are the ways that P2P lending is a good investment to a borrower.

  • Fast, easy application online
  • Lower rates and fewer interest charges
  • Extremely flexible terms and amounts
  • A personal experience that doesn’t benefit a company
  • No payments or annoying terms that online lenders throw into loan agreements
  • Friendly service and things done on your own terms

For lenders hoping to make some extra money by loaning out their extra change, you can benefit in these ways.

  • Great monthly income that is guaranteed
  • A way to invest without the risk of losing money
  • Easy to manage and keep control of multiple loans
  • Everything is done online so you don’t have to go anywhere for it
  • Access to certain benefits depending on which P2P website you use

How Does Peer To Peer Lending Work

If you’re just now finding out that P2P lending even exists, the process may seem confusing at first. In reality, it’s pretty simple. We’ll walk through a step-by-step process to help you understand where the money goes and who deals with it directly.

Apply for the loan through a third-party service to find you a lender

  1. A lender commits to giving you the money
  2. The lending platform gets the funds to you
  3. The lender receives the loan note from the lending platform
  4. You pay back the loan through the lending platform to the lender

It’s as simple as that!

What Types Of P2P Loans Are Out There?

In general, P2P loans are just amounts of money borrowed for any reason without specifications or collateral. However, you can get other types of loans depending on who you use as a lending platform, and what your investor is comfortable with.

Now, businesses have even hopped on the bandwagon of P2P lending, which is opening doors for larger loans and more long-term repayment terms. You can also go a secured route, where you put up a car or home title as collateral. These are much less popular since it, again, takes an advanced level of trust with the investor and lending platform.

What Are The Risks Associated With P2P Lending?

Whenever you’re putting your personal information out there online, you’re at risk for theft, be it identification fraud or your money was taken. Going through a trustworthy lending platform and researching your lenders first is always suggested to maintain your levels of personal security over your money.

With borrowing money, you also will always run the risk of being unable to repay your debts. Since you aren’t going through a bank but instead an individual, you could be dealing with someone who is understanding or a very big stickler for due dates. It’s a toss-up, but you can research beforehand to find out these things first.

Compared to other ways of borrowing online, such as payday loans or virtual financial companies, you’re not running any more of a risk with P2P lending than you would with them.

Who Are The Top Peer To Peer Lending Sites

To minimize risk potential and get the best rates possible, you need to go through reliable lending platforms. These websites are dedicated to working with lenders and borrowers, outside money sources such as partnered banks, and monitoring the repayment of the loan. The platform will process your application and connect you with a lender.

Picking the right site is the most important part of the P2P lending process. Here are a few of the ones who have reliable names in the game and have built up the history with clients needed to be a trustworthy option for you.

  1. Upstart

  2. Lending Club

  3. SuperMoney

There are several sites available that offer excellent options for P2P lending. Your best deal can be discovered by getting quotes from these 3 sites and shopping around. Compare rates, available lenders, reviews, and other factors to pick who you choose to work with.


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