In 2005, Zopa, the very first peer-to-peer lending, premiered in Uk and today, there are over 20 companies providing short term loans to borrowers globally. A number of these lending firms focus on micro lending and student loans, but there are several bigger companies for example Prosper.com and Lending Club that loan money for any wide variety of purposes.
The rapid development of peer-to-peer lending, known as P2P lending, is attributed to the advantages it offers to both borrowers and lenders over the traditional model of financing.
Benefits to Borrowers
The main benefits for the borrowers include easy application process, lower rates of interest and quick funding.
Quick and simple Application Process
Enter required personal information into the form listed on the website of a P2P lending firm, and you’ll get approved within a few minutes.
Probably the major advantage of getting unsecured loans from all of these peer-2-peer lending companies is affordable rate of interest. The key lending firms charge about seven percent APR around the money borrowed. They offer one-year, three-year and five-year term loans to their approved borrowers. The interest rate is charged based on the term chosen.
Depending on your loan amount, the funds are deposited into your account between one to three weeks. Most of the a small amount that are below $5,000 can be filled in a few days, and cash transferred to the borrower’s account with a week.
Good things about Lenders
The peer-to-peer lending is not only good for the borrowers, but it is also advantageous for the lenders. The many benefits of P2P lending for investors include getting high rates of returns on their own investment and spreading from the risk.
Subject to the loan types, the returns on the money invested through the lenders average around 10 percent. In today’s days of economic downturn where traditional financial institutions such as banks pay three percent on savings accounts or certificate of deposit, this 10 % is very rewarding for that investors, specially when the danger is spread on the number of pre- qualified, and FICO verified borrowers.
Peer to look loan programs can be beneficial to borrowers and also the community member lenders associated with these programs. Eliminating the necessity to obtain unsecured loans, cash advance, payday and credit card advance loans, will help lessen the potential of borrowing money at super high rate of interest levels. With lower rates, consumers convey more manageable payments, ensuring that lenders may be repaid promptly and in full.