Peer to peer lending otherwise termed as Person to Person or P2P lending. It is an easier way to lean money, without the hassles like the banks. But this seems to not too familiar to everybody. So we will cover some few details enough to understand the whole idea.
Securing a loan from the bank is not easy, do you agree?
Making it possible
This method of lending connects the borrower directly to the investor. And it is through the digital platform. And it eliminates the intermediary – the bank. The cost that the bank needs for them to survive in the industry makes the loans through them high-priced.
It is why that is not surprising that investors are getting a higher interest rate of return. They do not penalize the borrowers by not imposing higher loan rates.
Peer-to-peer lending does not have the overhead and cost that physical banks need to pay off. So, instead of spending some part of the margin to other business costs, it goes to the ROI of the investors right away.
The only screening P2P does is the credit grades of the borrowers. They determine it through credit score, profile, and income. And also considering the loaned amount and payment term.
Exploring the Benefits
With peer to peer lending, someone borrows money via electronically, from investing people. It is a lending platform. It has so much different from the troublesome policies of the banking institutions. So, we can do it online, what an awesome convenience!
It is a two-way traffic. The individual investor gets to profit from the payments of the borrowers. On the other side, debtors will get their inexpensive and fast cash advances.
Note: the speed of the process would still depend on the borrower’s response. Such as more information or the lender’s document requests.
Clients can get better terms as compared to local banks. While investing parties who lends money gets higher rates of returns too.
These steps are got differences from other lending institutions. Yet there is still commonality to loan process in general.
Step #1: Fill out a form found on the platform.
Step #2: The loan inquiry will be forwarded to the investors. They will figure out if they are willing to invest or decline. And they will decide on the rate based on the borrower’s loan grade.
Step #3: If an investor is willing to lend the amount to a borrower, it is now pre-approve and ready for funding.
Step #4: The borrower is then asked to submit legal documents. These are like a statement of income, proof of employment and list of debts if case applies.
Step #5: Loan is for endorsement and checked if the documents submitted aids the claim. Then it will either be for full approval or will need more documentation.
Step #6: Approval. At this stage, prepare all loan documents and send off for the borrower’s signature.
Step #7: Once the signed, documents need to be returned to the lender through the platform. The funds will get wired transferred to your bank account.
With all these processes, the platform charges a start fee which is between 1% and 5% of the loaned amount. No other fees involved.
To wrap this up, peer to peer lending two players. If you will stand at the corner of the investor, higher rates of return for the proceeds of your money invested. While as a borrower, it is an inexpensive, fast and easier way to get a loan.
So before making a decision, always be informed. Study more about peer to peer lending industry. As it will help you understand better. And fends you off from frustrations caused by uneven expectations. Please click here to learn more about the review of the leading companies.