If you are looking to either make or borrow money but would like to avoid traditional loans from financial service providers, peer to peer lending might be right for you.
Almost everyone in the world utilises credit at some point in their lives. Most people need credit to finance their homes, vehicles, store accounts, the education of their children and many other aspects of their lives. Often, it is impossible to go through large, reputable financial service providers to receive finance and many people try (wisely) to avoid loan shark agencies. This makes peer to peer lending one of the best options for gaining finance.
What is peer to peer lending?
Also known as person to person lending, it is a financial transaction (usually lending and borrowing) that occurs between two individuals without an intermediary. The lender earns a profit from the borrower in the way of interest. The terms and conditions of the transaction, including interest rates, amount and whether there is an expiration period on the loan, will be decided by the lender and borrower with the help of a person to person lending company.
Because of this, the terms and conditions of the transaction are flexible and dependent on the needs and requirements of the parties involved. This gives both the lender and borrower a lot more freedom to make their financial transaction suit them than in other situations.
What is peer to peer lending usually used to finance?
People use peer to peer lending to finance a large range of things from helping to pay for items like cars and household goods, covering their living expenses if they lose their jobs, paying for their children’s education, funding their businesses, medical expenses, paying for events like weddings, birthdays and holidays and debt consolidation.
What do peer to peer lending firms do?
Peer to peer lending firms do not act as the lender of the money. They simply provide a platform for successful and safe peer to peer lending between individuals. They help to negotiate terms and conditions and they even bring lenders and borrowers together based on their similarities (like geographical location or background).
What makes this lending work?
Because peer to peer lending is not conducted through an intermediary like a financial service provider, many people wonder how it actually works. Peer to peer lending works because both the lender and the borrower are often from the same community. Studies show that lenders are less likely to fail to make payments to people they consider to be in their own community or social group. There is also often social pressure for lenders to hold true to their payment agreements.
Where can you find a scheme like this to borrow from?
There are many peer to peer lending firms who will either put you in touch with a lender or a borrower (depending on whether you want to lend or borrow money) or help you to work out the terms and conditions of an agreement with a lender or borrower you have already found. Out of the hundreds of peer to peer lending firms, some of the more well-known ones include Prosper, the Lending Club, Ponzi, Peer to Peer Lending South Africa, P2P Financial, Virgin Money, Zidisha, Zopa, Rate Setter, Funding Circle, Person to Person Lending and Collaborative Finance.
There are, of course, many more companies available. It is essential to find a reputable company that is honest, has experience and the correct training and that has your best interests at heart. It is possible to conduct peer to peer lending without a peer to peer lending firm, but it is better to bring in a professional to make sure that you get it right. When it comes to money, whether you are lending it or borrowing it, you want to be sure that you are in trustworthy, experienced hands.