P2P or peer lending is a system where money is lent to individuals, also known as peers, who have been turned down or otherwise do not want to use traditional banks and their rigid regulations to receive the funding they need. The lending happens online, supported by various lending platforms, and makes use of an assortment of tools for credit checking and asset evaluations before lending. P2P commercial lending can be backed by security, such as real estate, or it can be unsecured with no collateral. There are several advantages of procuring secured loans as follows:
- A lender makes more money this way through the interest rates made than they would by storing their money in a conventional savings account.
- The volatility of interest rates with P2P lending is much lower than other forms of investments.
- P2P is safe. It’s similar to investing in a commercial property where your assets are secured by leases. This way, you’ll be able to acquire a regular stream of income at an even higher rate than what you would earn in a stock dividend.
- Investors are matched to loan requests and borrowers will obtain a loan after due diligence is completed.
- P2P is web-based, allowing you to fund your projects anywhere, anytime, and at your convenience.
P2P lending is ideal for people who also need money and have no assets to secure or aren’t willing to offer collateral. They work just like a personal loan and can be used for various needs. Even though your credit history will be checked and your income as well, the loan amount is usually up to $35,000 for consumer loans. In addition, they are quick to obtain because they are provided from an online platform. Seeing as they are higher risk than secured loans, they tend to have a higher interest rate.
P2P lending has a track record of consistent returns. A substantial number of individuals involved in the industry have recommended it as a profitable investment option, as it boasts yields significantly higher than a money market or time deposit. You are also guaranteed monthly income unlike the stock market where returns are often unpredictable. P2P lending can be safe, secured by collateral like real estate, transparent, and provide you with higher yields.