Peer to peer lending advantages and disadvantages

What is peer to peer lending?

Before diving into the advantages of Peer to peer lending (P2P) it is vital that we understand what it is. Peer to peer lending works on the idea of cutting out the conventional financial institutions that would otherwise be controlling your transaction and replacing it with a system that allows a sort of community lending. Because it is the peers of a community lending to a peer of that very community, the term Peer to peer is established.

What is a peer-to-peer lending platform?

Since we cut out the conventional financial institution out of the picture we are going to need some sort of system to control the lending that happens through the peers, otherwise we would end up with countless legal cases where X lends his neighbour Y money on certain terms but Y forgets them and claims other more beneficial to himself terms. To avoid unnecessary conflict it is always best to keep loans managed by someone or something. A P2P Lending platform takes on the job of a company with different financial advisors from the comfort of your laptop or mobile device.

The P2P Lending platform will track who exactly has lent what and how much to whom. It will do this while verifying that the people requesting the loans are real people and so are the people giving the loans.

It will allow larger sums to be lent to a peer by various peers coming together. Traditionally this would be quite difficult seeing that X may need a £10,000 but Y can only lend £8,000.00. With P2P lending this becomes much easier because X can borrow money for Y and Z on completely different terms, all of which the lending platform will take care of.

In addition P2P platform users tend to get much better rates than they will through a bank and they offer much more flexibility. Typically a P2P investor will be able to find a peer that they would like to invest in and typically it is as easy as clicking a few buttons.

The P2P platform will then take care of the rest, emails, verifications, updates, interests, pay-outs and many more functions all at the power of the fingertips of the  platform user.

To find out whether the P2P platform can be one to help your business, book a demo here