Peer-to-Peer Lending: An Emerging Industry

If you are a person who is looking for ways to grant your loans such as auto loan, study loan, business loan, or for your debt consolidation, an emerging option for you nowadays is the peer to peer lending. The P2P lending is just an emerging industry but it is already a standalone. This is even a fast growing industry wherein people considered it as their best options instead of looking for other means.

The borrowers will let the bank find the lender. Lenders, however, focus on more important factors such as conducting due diligence through credit check as well as the collection of payments. The role of the credit checking is to ensure that the lenders are able to secure their business by validating the client’s qualifications as well as the determination of the maximum loan amount granted and the interest rate.

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Why are more people patronizing the peer to peer lending? It has a lot of benefits. The first reason is that it is very effective when it comes to debt consolidation. In most cases, the interest being charged to you is lower than those other sources of consolidation and at the same time, you are able to pay off your debt exactly on its maturity date. Next reason is the fact that funding is easy to locate. If you are planning to start your own business and you need to apply for a loan, going to the bank might just not be a good idea. But having P2P only means that they will look for you. Your loan will go through a market place for potential lenders. Another reason is that the interest rate is often low as compared to other form of personal loans. Based on surveys, 6% is the most common interest rate for P2P lending but it is dependent on your credit stand. Credit cards even offer higher interest rate but P2P is lower and has fixed rate.
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But what is really the reason why more lenders choose peer to peer lending? The top answer is your earnings. The rate of 6% to 19% are basically the rate of returns as per reports of the lending club. The range of return in terms of percentage is indeed very high compared to other investment companies. Another reason is the fact that they have preventive measures to avoid default by means of credit screening. The limit for default is 2% or lesser. The default rate is in fact very low even though the nature of this business is not having collaterals as back up and therefore, it is unsecured type of loan. Lenders are also encouraged to fund more loans as part of the requirement already.