P2P ( Peer To Peer Networks

     
Consumer Reports, she is an expert in credit and debt, retirement planning, trang chủ ownership, employment issues, và insurance. She is a graduate of Bryn Mawr College (A.B., history) and has an MFA in creative nonfiction from Bennington College.">
Julia Kagan has written about personal finance for more than 25 years and for baocaobtn.vn since 2014. The former editor of Consumer Reports, she is an expert in credit and debt, retirement planning, home ownership, employment issues, and insurance. She is a graduate of Bryn Mawr College (A.B., history) và has an MFA in creative sầu nonfiction from Bennington College.

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What Is Peer-to-Peer (P2P) Lending?

Peer-to-peer (P2P) lending enables individuals lớn obtain loans directly from other individuals, cutting out the financial institution as the middleman. Websites that facilitate P2Phường lending have sầu greatly increased its adoption as an alternative sầu method of financing.


P2Phường lending is also known as “social lending” or “crowd lending.” It has only existed since 2005, but the crowd of competitors already includes Prosper, Lending Club, Peerkhung, Upstart, & StreetShares.


P2P. lending websites connect borrowers directly lớn investors. The site sets the rates and terms & enables the transactions.P2P.. lenders are individual investors who want to lớn get a better return on their cash savings than a bank savings account or CD offers.P2Phường borrowers seek an alternative sầu to lớn traditional banks or a better rate than banks offer.

Understanding Peer-to-Peer Lending

P2P. lending websites connect borrowers directly khổng lồ investors. Each website sets the rates and the terms và enables the transaction. Most sites have sầu a wide range of interest rates based on the creditworthiness of the applicant.


First, an investor opens an account with the site & deposits a sum of money to lớn be dispersed in loans. The loan applicant posts a financial protệp tin that is assigned a risk category that determines the interest rate the applicant will pay. The loan applicant can Review offers and accept one. (Some applicants break up their requests inkhổng lồ chunks & accept multiple offers.) The money transfer and the monthly payments are handled through the platkhung. The process can be entirely automated, or lenders and borrowers can choose to haggle.


Some sites specialize in particular types of borrowers. StreetShares, for example, is designed for small businesses. And Lending Club has a “Patient Solutions” category that liên kết doctors who offer financing programs with prospective patients.

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How P2Phường lending evolved

Early on, the P2P lending system was seen as offering credit access to lớn people who would be spurned by conventional institutions or a way lớn consolidate student loan debt at a more favorable interest rate. In recent years, however, P2P.. lending sites have expanded their reach. Most now target consumers who want to pay off credit card debt at a lower interest rate. Home improvement loans & tự động financing are also now available at P2P lending sites.


The rates for applicants with good credit are often lower than comparable ngân hàng rates, while rates for applicants with sketchy credit records may go much higher. LendingTree.com, for example, offered personal loan rates from 10.19% to 24.98% as of December 2019. Peersize posted loan rates at a range of 5.99% to 29.99% as of February 20đôi mươi. The average credit card interest rate was 17.30% as of Feb. 5, 20đôi mươi, according khổng lồ CreditCards.com.


For lenders, P2Phường lending is a way khổng lồ generate interest income on their cash at a rate that exceeds those offered by conventional savings accounts or certificates of deposit (CDs).


Special Considerations

People who are considering joining a P2P. lending site as investors need to worry about mặc định rates, as do conventional banks. Zopa had a default rate of 4.52% for loans granted in 2017, according to the Financial Times, with other sites forecasting similar mặc định rates. An S&P/Experian composite index of mặc định rates across all types of lending khổng lồ U.S. borrowers has been fluctuating between about 0.8% và 1% in the period from April 2015 to lớn December 2019. The mặc định rate on U.S. credit thẻ debt fluctuates much more, hitting a high of 9.1% in April năm ngoái but dropping lớn 3.56% in mid-2018, according to lớn Market Watch.


Any consumer or investor considering using a P2P. lending site should kiểm tra the fees on transactions. Every site makes money differently, but fees và commissions may be charged the lender, the borrower, or both. Like banks, the sites may charge loan origination fees, late fees, and bounced-payment fees.


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