What are peer to peer lending Advantages and disadvantages?

 Peer to peer lending is a type of direct lending of funds to consumers and small businesses without the participation of an intermediary in the process. Generally, p2p lending is done using an online platform which matches borrowers with lenders. This type of alternative finance offers some great benefits to both lenders and borrowers.

Advantages

  1. High returns for investors: p2p platform typically offers high returns to investors compared to other types of investments. 

  2. An accessible source of funding: this alternative platform is more affordable for some borrowers compared to traditional loan providing financial institutions. The reason could be the low credit score of the borrower or a particular loan purpose.

  3. Low interest rate for borrowers: because of intense competition, these peer to peer loans have a low-interest rate and origination fee.

While, peer to peer lending has its benefits, there are a few drawbacks to this as well:

  1. No Government protection or insurance: peer to peer platforms have no protection provided by the government. Nor there is any other type of guarantee in case of default borrowers. 

  2. Risk: p2p loans have high credit risk, since most applying borrowers have low credit score and have been unable to get a loan from the bank. Hence, being a lender, you have to be vigilant of the default probability of the borrower. 

  3. Legislation: p2p lending might not be provided to some lenders or borrowers because some jurisdictions don’t allow it or need the platforms that provide this service to comply with the investment regulations. 

To start your investment journey visit our website.

Comments

Post a Comment

Popular posts from this blog

Peer to Peer Details

https://kuflinkfinanceservices.blogspot.com/2020/07/innovative-isa-providers.html https://kuflink242700597.wordpress.com/2020/07/04/innovative-isa-providers/ https://michalchal48.tumblr.com/post/622711911163772928/ifisa-providers https://kuflinkfinanceservices.blogspot.com/2020/07/peer-to-peer-loans.html#main https://kuflink242700597.wordpress.com/2020/07/08/best-innovative-isa-providers-service/ https://kuflink.webnode.com/ http://kuflink.mystrikingly.com / https://kuflink.page.tl/
Read more

Peer to peer lending

Image
  Peer to peer lending  is also referred to as crowd lending or social lending. It was first introduced in the year 2005. There are many popular p2p platforms available in the marketplace. With peer to peer loans people can borrow loans from lenders directly eliminating the middleman. These platforms have been adapted highly as an alternative to traditional financing options. Each platform has its own unique terms and rates which allow transactions. These providers set a variety of interest rates based on the applicant’s creditworthiness. If one wishes to borrow funds, these platforms can match them up with individuals who are willing to lend money to them.  The providers that act behind the scenes are known as platforms and they play the role of intermediaries between the lenders and the borrowers. These  p2p platforms  offer low interest rates compared to the traditional loans. But this depends on different factors including the applicant’s credit rating. Individuals who have good cr
Read more