Peer to Peer Lending

Peer to peer lending as abbreviated as P2P lending is the practice of lending money to different unrelated people without going through traditional banking institutions processes. All the activities take place online on the companies’ websites after going through credit checking tools and using different lending platforms. It is also known as crowdlending. There are many of these companies in the United states that offer students loans, payday loans, secured business loans and real estate loans. Interest rates are fixed by lenders that mostly are very low for competition. The following companies are involved in the business;

Lending Club
It is the industry leader with the biggest market share started in the year 2007. It has given out loans of approximately $9 billion. Their website has a user interface that is friendly and has the largest 3rd party investor worldwide. It is the first online lender to be listed publicly in New York stock exchange. With interest rates of about 6.6% to 29.9%, one can get a loan of between $1000 to $35000. An investor in this company can earn between 5% to 9% depending on the risk involved.

Prosper market
It actually made history by being the first ever lending company launched in 2006. It has achieved tremendous growth and success. Forbes recently named it as one of the most promising companies in the United States. They have given out loans of about $3 billion so far. Their loans range from $2000 to $3500. Interest rates are between 6.6% to 35.95%. Investors earn 5% to 9.5% depending on the risk taken.

Funding Circle
It was first launched in the United Kingdom but was expanded into the United States. They recently raised $65 million. Their target groups are small businesses that have been left out by the banks. Since it started in 2010, it has lent out $500 million for business expansion.

Upstart
It is a platform where you can obtain unsecured funding through fixed rate loans. Credits given are dependent on estimated future income. The school one attended, the area of study, academic performance, and employment history are used to access the amount of loan you can qualify to get. It has given out loans worth $7.7 million.

Kiva
It is a non-profit organization started in 2005. It helps low-income entrepreneurs and students in developing nations by encouraging the flow of capital from developed nations. The organization has been able to reach over 1.2 million people giving them $590 million loans with a 98% repayment rate.

Zidisha
It is also a non-profit company founded in 2009. It works across international borders linking lenders to borrowers. Many people turned into it because most banks have refused to increase their loan portfolios. They don’t require financial records or digital records. Borrowers defaulting have made investors to scrutinize more before taking any risk.

Conclusion
Although many people like P2P lending because of its low lending rates, the truth is their benefits are not very profound. Getting out of debt is crucial, but the process is not that fun. Making monthly payments is a real chore. Investors also take a long time to make meaningful dividends, but it remains one of the best ways of lending money.