The P2P lending industry (peer-to-peer) has become very popular since it started in 2005 when Zopa was first launched in the UK. Currently, there are over 20 firms in the world offering potential borrowers the best alternatives to traditional financial lenders and business loans. Some of the P2P lenders specialize in offering school loans as well as microlending.
Compared to traditional lenders, you will not receive penalties or a higher interest rate because you need the money to consolidate previous debts or pay your medical expenses. Many might question the reason behind the rapid growth of the peer to peer lending industry. The best answer is that it offers lenders and borrowers numerous efficiencies compared to the traditional financial lenders.
4 Reasons Why P2P Lending Is Convenient For Borrowers
1. Easy Application Process
First, it is an online application which beats you going to the bank or physical address to make the application yourself. Secondly, you can input some of your personal information online and you can get the loan within a few minutes. That means you can apply for a loan anywhere as long as you have internet and computer access. Once your application is approved, you can wait for your funds to be deposited.
2. Favorable Interest Rates
Any borrower would be happy about the interest rates offered under this lending niche. Currently, the largest lenders in the p2p niche have interest rates as high as 7% APR for all the best customers. Once your application is approved, you will be offered a few payback timelines including 1, 3 or 5 years. The interest rate will be adjusted accordingly depending on your repayment term.
3. Speedy Access Of Funds
Want free money?
You will not find any other lender who will offer funds so fast. Here, you can get your funding within 1 to 3 weeks depending on how much you have borrowed. You can borrow a small loan of about $5000 and get it funded within a week.
4. Higher Funding Rates
Over the period that crowdsourced funding has been available, the funding rates have increased. You can get as little as $1000 up to as high amounts as $35,000. The higher amounts can be used to fund expensive projects and you can repay depending on the repayment plan you have chosen.
Why Do Lenders Love P2P Loans?
1. Spreading Risk
The lenders in this platform are not big institutions although there might be a few. However, a large number of loans will be funded by smaller institutions and individuals in small amounts. A lot of investors are interested in this alternative compared to the interest rates provided through the traditional banks or other investment options such as the stock market.
2. High Returns
Depending on the type of loan and the repayment term you have applied for, the return might go as high as 10%. In the current economic market, such a return is actually feasible, especially if it has been diversified into bigger pools of FICO verified and pre-qualified borrowers.
3. Lenders Choose Their Borrowers
The lenders will categorize the borrowers in their network to make sure they have passed the identity verification process. Any borrowers will get information relating to the interest rate as well as the terms associated with the risk of getting a loan, the credit score and any other information in the funding algorithm. Lenders can choose whichever loan they are interested in and invest in it. You can skip anyone you don’t want and choose someone who matches your preferences.
The benefits to both the lenders and borrowers in the peer-to-peer lending platform can be attributable to the popularity of the option compared to regular financial lenders or banks.