If you are in search of a real estate loan, you may be asking, “what is the difference between marketplace lending and peer-to-peer lending?” These terms have become more common in recent years to describe options for individuals who may be unable to receive funding from banks. And to answer the question, there is absolutely no difference between the two. The terms are synonyms of each other and generally speaking mean investors lending directly to borrowers.
Marketplace lending, or peer-to-peer lending, is generally carried out online, allowing borrowers to quickly access money they may not have been able to get from a bank.
These online platforms allow the marketplace lenders to offer money at their preferred interest rate compared to a standard bank account; receiving significantly greater profits from it. In addition, to spread risk, the lender may finance a portion of the money requested, and do so with a number of properties instead of financing one loan 100%. Importantly, the loan is secured by real property worth significantly more then the loan amount.
Many players in the industry came to believe the term peer-to-peer lending implied loans from a small or retail investor. Because of this, marketplace lending became a preferred choice of terminology, making it more apparent that larger institutions can also be a part of that lending space.
It is important to understand that marketplace lending (peer to peer lending) connects investors and borrowers directly at favorable interest rates and easy payment terms, and opens the door to borrowers who may not have otherwise received funding for their real estate, or other, venture.