What are P2P Loans and what are Their Benefits?
The term P2P loan has become increasingly popular as of late. In case you’re unfamiliar with it, it refers to a specific type of loan that requires no intermediaries like a bank or other financial institution. As the name P2P or peer-to-peer suggests, these loans are borrowed from one person or group to another. That means that you can apply for a loan without ever having to visit the credit bureau or a bank. Since this type of loan has been around for some time, experienced lenders know how to earn the highest returns and keep your investment secure.
With all these benefits, the fact that P2P loans are so popular with investors does not come as a surprise? But are there any drawbacks to it? If you want to learn more about P2P loans, read on to see how they compare to traditional loans, how the process works and why investors are rushing to get in the game.
The Benefits for the Lender
Lenders investing in P2P loans can expect higher returns than they would get from a savings account. On average, investors can expect the returns from P2P lending to be four times higher than those at reputable banks, as reported by Forbes. Essentially, with P2P loans everybody wins. This is why investors are pursuing P2P as an attractive addition to their investment portfolio. Of course, you have to use reputable P2P platforms like Silver Bullion.
The Benefits to the Borrower
Borrowers looking to escape debt often resort to debt consolidation or credit cards. However, P2P loans are a great option for people looking to repay their debt at an interest rate more affordable than the ones offered by banks and other financial sources. P2P lending offers more affordable loans to those in need.
What Type of Loans are Offered
Usually, P2P loans are usually small loans, around $1000 to $35000 for individuals. However, you can use that money however you like as these loans are flexible. People often use these loans to pay off other debts or loans with higher interest rates.
Another common reason individuals apply for these loans is for a home remodeling projects. The interest rates for special loans granted for these types of projects at a bank are higher. Furthermore, the money the bank grants can only be used for home remodeling. P2P gives you more freedom to use the money how you see fit with lower interest rates.
Small businesses also often resort to P2P loans when starting up. Since opening a new business involves paying some money upfront, most people turn to banks. However, banks set the interest rates for new businesses high due to the risk of the business failing. With P2P loans, investors are free to choose whether to finance a startup or not, which makes the interest rates lower. However, the amount you can get from these loans is limited.
P2P lending is a promising financing option that’s only starting to gain momentum. But since P2P loans still aren’t completely regulated, you need to make sure to side with a reputable and trustworthy institution.
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