Peer-to-peer lending refers to the practice of lending money to individuals as a part of an effort to help individuals launch their ventures or pursue their passions. The P2PL offers people the option of bypassing the traditional financial institutions to secure the funding required to expand a venture or pursue an endeavour. Aside from applying for business credit cards as an alternative to help fund your start-up business, peer to peer lending should also be considered.
How does peer to peer lending work?
Peer to peer lending eliminates the middle man in the lending process. The typical applicant is subjected to a lot of paperwork and red tape. P2P lending is essentially borrowing directly from one’s peers. The individual’s credit history is checked as a part of the review process. The terms of repayment are worked out between the borrower and the lender. The terms for the loan are established by the lender and agreed upon between the two parties.
What is the marketplace like for peer to peer lending?
Many investors are looking at the peer to peer lending industry as a part of an investment strategy. The credit crunch in the traditional marketing place has opened additional lending opportunities for those who need access to credit but don’t qualify as easily for the traditional loans. Currently, investors can charge nearly 20% for loans offered. Many investors are able to take advantage of the various lending opportunities available to make funds available to students, consumers and entrepreneurs.
Advantages:
1. Opportunity to invest in ventures with lower competitive rates
2. Steady growth in the lending industry across the various platforms
3. A chance to lend money to entrepreneurs located in developed countries
4. An average 5% return on any investments made
5. Lender has complete control over terms
How the marketplace for P2P lending has changed
P2P lending is gaining the attention of investors in the industry. Investors indicate an interest in P2P loans as a potential asset class as an emerging investment opportunity available through the Internet. The SEC has recently moved to expand opportunities for those interested in investing in P2P lending by permitting solicitation and advertising for these services. The SEC has also finalized its crowdfunding rules for the various Internet platforms in a move that could invite investors to participate.
Different markets
Funding Circle and other platforms have changed the face of peer to peer lending. Different lending sites have made it possible to cater to specific audiences based on markets served or their affiliations. Companies like SoFi.com make funds available to alumni to assist in helping them launch their vendors. Other companies like LoanBack.com permit people to lend money directly to friends and peers. Lending sites like Kiva.org make loans available to those who are operating businesses abroad in developing countries.
The marketplace looks promising for those interested in the P2P lending marketplace. With average returns of 5% or more, investors can incorporate these platforms as a part of their investment strategy. The P2P investment opportunity offers steady cash flow, diversification, a steady return, and flexibility to investors.