Peer-to-peer lending(P2P), also referred to as crowdlending or social lending, is a form of lending that makes it possible for persons to directly obtain loans from other persons, thus eliminating financial institutions as middlemen. Over the past few years, websites enabling P2P lending have increased significantly, offering it as a substitute financing method. P2P lending provides both unsecured and secured loans. Nonetheless, a majority of P2P loans are personal loans that aren’t secured. It is on rare occasions that you’ll find secured P2P loans, and when offered, they are typically supported by luxury goods. P2P lending has some exceptional characteristics that make it seem like an alternate way of financing. If you want to get financial assistance, you can always use review sites such as Britainreviews.co.uk to look at top finance companies UK reviews. Avoid finance companies that have negative reviews, and this way, you’ll get reputable finance companies.
How peer-to-peer lending works
P2P lending has a reasonably straightforward process. It involves an online platform that’s specialised and where all transactions are carried out. The general stepwise process is as below
- A potential borrower who wants a loan performs an online application on a P2P lending platform.
- The platform determines the credit and risk score of the applicant after evaluating their applications, and then a reasonable interest rate is then allocated to the applicant.
- On approval of the application, the applicants then receive the options that are available from the investors based his assigned rates of interest and credit