What is Peer to Peer Lending and Different Platforms

Peer to peer lending is a non-traditional method of lending and borrowing money which is gaining popularity day by day. This trend is gaining prominence among loan seekers and loan providers at the same time and has become a multi-billion dollar industry. Peer to peer lending has changed the conventional method of lending and borrowing money by providing loan seekers and lenders with a new and much favorable option.

Before this innovative platform there were not many promising options if you needed to borrow money, the only popular option one had was to contact a bank and sit with their loan officers while they decided if you are worthy of the loan or not.

What is peer to peer lending?

Also referred to as P2P lending, basically it’s a virtual platform which was introduced for the first time in 2006. That connects both the lender and the borrower by eliminating the middle man like big banks or institutional lenders, so that they can meet directly to arrange a mutually beneficial setting much quicker compared to the conventional banking systems. The site sets the rates and terms and enables the transaction. The best thing about these lending platforms is that:

  • Borrowers that have been denied loans by other institutions can still get loans from this platform sometimes on higher interest because of your low credit score, but still can get loan to meet urgent needs.
  • These lending platforms provide much better interest rates for both the borrower and the lender by removing the banks from in between and operating only virtually. Thus removing the operational, management and equipment and building related costs associated with physically existing businesses.

Different Peer to peer lending platforms

Since its introduction in 2006, there have been an enormous growth in peer to peer lending platform options. Now there are many different platforms available to cater to your different kind of loan needs including:

  1. MyInstantOffer: it is a portal to its parent company the lending club which is a P2P Platform. They offer pre-approved loans of up to $40000 which are required to be repaid within three to five years. You can check details at Myinstantofferloans.us about loan offers relating to needs like home upgrading, paying off credit card bills or medical expenditures, educational expenditures, bulky purchases, or as a means of debt consolidation.
  2. SoFi: A short form for social financing, they are known for financing student loans, refinancing existing loans, mortgages and personal loans as well. The sanction of loan from this platform is not strictly based only on how much you earn or your credit score. Rather on non-traditional things like the college or university you are studying from, your GPA and majors, your occupation.
  3. Upstart: a fairly new platform, the minimum loan amount you can borrow from Upstart is around $3000 to a max of $35000. They offer two loan terms one of 36 months and the other of 60 months. They too focus on non-traditional criteria’s to offer loans.
  4. Prosper: this platform funds loans for all sorts of purposes like personal loans, auto loans, short term loans, bridge loans, home renovation loans, and debt consolidation etc. the minimum amount you can loan using this platform is $2000 and the maximum amount is around $40,000.
  5. Other names include: Funding Circle, Street Share, Fundrise, Peer Street, Peerform and Kiva.

How does peer to peer lending work?

There are a few simple steps that are common to most of the P2P Platforms which you are required to follow in order to get yourself a loan:

  1. You start by filling up a brief questionnaire on their website asking you a few important details necessary for them to assign you a loan grade.
  2. After the assignment of your loan grade, it is made visible to all potential investors to review your application and decide if they are willing to go forward with the investment.
  3. After there is a certain pool of investors available to fund your loan request, you become eligible to be funded.
  4. When matched with potential investors you are then required to submit few important documents related to proof of employment and income etc. you might also be required to provide a list of your already existing loans.
  5. Your provided documents are reviewed and matched with the information you provided after which the loan request is approved.
  6. After approval final documentation is prepared for signatures after which you receive your loan amount in your bank account in the next 24 to 48 hours.

Pros and Cons

  • As a borrower you can get loan even with a bad credit score although this might be possible with a high interest rate but if you have a good credit score you might even get best interest rates possible.
  • As a lender the positive point is that you can get much better return on your investment compared to conventional banks while negative is that these loans are not very secure and borrowers can default while paying back.

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One thought on “What is Peer to Peer Lending and Different Platforms

  • November 14, 2019 at 8:32 AM

    Great stuff..! I really like Kiva. I am very much interested to start my own crowdfunding site like Kiva. When I was searching for this kind of site, I found ecrowdfundr.com. eCrowdFundr is the best Crowdfunding readymade script for fin-tech startups to launch website easily and quickly. Its nearly matches Kiva.

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