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Lessons Learnt From Peer to Peer Lending

Peer to Peer lending is rapidly growing as an alternative investment market in the financial services industry by providing loans to consumers. The P2P platforms assist the lenders and borrowers in lending money by serving as the intermediary that facilitates the transactions. As a result, it also eliminates the requirement of banks to act as a broker for providing loans. Whenever someone requires a loan and cannot obtain it from the banks, they can contact the P2P platforms to get it. That helps successfully bridge the gap that arises when you cannot gain enough funds from the traditional banking system. Also, the interest rate is in favour of both the borrower and lender. That is because there is careful screening of borrowers by the P2P lending platform as per their credit score. Those with above-average credit scores obtain better interest rates on loans, whereas P2P platforms charge higher interest rates from those with below-average scores. 

What is Peer to Peer Lending?

It is a method with which individuals lend and borrow money at an agreeable interest rate with the help of the P2P platform. The borrower has to register at the Peer to Peer lending platform and submit the loan request. The P2P platform assesses the borrower’s profile for creditworthiness by reviewing various aspects of the borrower’s social and financial conditions. For example, they can find out if the borrower has a job and what their buying patterns are on different online stores to see how they spend their money. The P2P platform can also view their previous credit history to ensure that the borrower has been returning the loan money previously. After considering these details about the borrower, the P2P platform carefully decides about granting the loan to the individuals. That is how the screening process at most platforms ensures the security of the lenders. That is because the P2P loan providers focus on providing loans to the borrowers about whom they are sure that they will pay back.

Not All the Peer to Peer lending Platforms Operate the Same Way

Peer to Peer lending is a relatively new form of investment. People who want to invest in P2P lending have a question that “what kinds of Peer to Peer platforms operate in the market?”

What we have found out is that there is a wide variety of platforms in the market. You can gain loans for just any type of financial requirement. It can range from jewellery, automobiles, property, business and credit card debt to house renovation loans.

Now that also leads to another question, which is, “what is the security level of these loans?” Lending money on all these platforms involves various types of perks. Most of the platforms launched several years ago are operating well in the market. The most successful platforms work in the real estate category. The majority of the real estate Peer to Peer lending platforms secure loans with the help of on-location property. They ensure that they secure them against the properties that the lenders can easily investigate on the web.

There is Plenty of Profit in the Real Estate P2P Loans

It is surprising to tell you that you can invest in the real estate market without buying a property or assuming the responsibility of becoming a landlord. It is also a highly secure method to diversify investments. So, instead of investing in a financial institute like an open-ended investment company, you can lend your money to P2P real estate loans.

There are also many choices, with several platforms setting the minimum loan value to £25 per loan and others having investments starting from £10,000. If you look around, it is easy to select several loans that provide decent ROI (Return on Investment) and the loans are secured by the collateral property. With a bit of search, you can give loans to borrowers who require them for projects like home renovation, and you can also gain interest while lending money.

Conclusion

P2P lending is rapidly developing as an alternative investment industry for providing loans to consumers. The P2P platforms facilitate the lenders and borrowers in lending money by serving as the broker that performs the transactions. The Peer to Peer lending UK platform examines the borrower’s profile to determine their credit score by reviewing several details of their social and financial conditions. Also, there is a great variety of platforms that provide P2P loans. The loan types range from jewellery, automobiles, property, business and credit card debt to house renovation loans. The majority of the platforms established several years ago are doing great business in the market. There is plenty of profit in real estate Peer to Peer lending.

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