What Is Peer-to-Peer Lending? Everything You Need to Know

Peer-to-peer lending is slowly changing the financial landscape, giving alternatives to both borrowers and investors.

What is Peer-to-Peer Lending?

Peer-to-peer lending, also known as crowdfunding, or social lending, is a form of borrowing where instead of a bank, borrowers connect directly with individual lenders through platforms. As such, peer lending eliminates the middleman resulting in better loan terms and other benefits.

How Does Peer-to-Peer Lending Work?

Borrowers

For borrowers, peer-to-peer lending eliminates the hassle of getting a loan. Unlike traditional financial institutions that demand mountains of paperwork and take forever to approve a loan, peer lending platforms require less documentation and approve loans faster.

How Does Peer-to-Peer Lending Work?

Borrower’s process

- The borrower opens an account with details on their financial needs and situation. - The borrower is assigned a loan grade based on their credit check.  -The borrower may be asked to submit supporting documents such as employment records, other debts, etc. for review.

How Does Peer-to-Peer Lending Work?

Lenders / Investors

For investors, attractive returns are among the major reasons they participate in peer to peer lending markets. It also helps them diversify into different asset classes while offering an opportunity to fund social causes.

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