If you are aware of the fact that your credit score is not up to the mark, you might be tempted to opt for any one of the high-risk loans to get fast cash in your pocket. Payday loans or unsecured high risk personal loans are two examples of these types of loans. A very common type of online loan, which can help you in times of your emergency, even with low credit scores, is a P2P loan. There are special websites dedicated to the same which connects individual investors with people seeking loans. They help in getting the needed cash very fast and make a great amount of difference in the financial condition of the applicant. The loans are sanctioned within a week and often people with not too good credit scores are also considered.
Who are peer-to-peer lenders?
The concept of peer-to-peer lending is based on social lending, a concept prevalent since ages. As often, people take loans from their friends and relatives, in trying financial situations, the concept of peer-to-peer lending is the same wherein the lenders lend money to the borrowers, without checking much of their credibility. The lenders often love investing in these websites for the purpose of investment. Now, why do people invest?
- It is either for preserving the wealth or for retaining the buying power of the hard-earned savings.
- It can also be for accumulating wealth or growing the assets.
Whatever be the reasons for investing, naturally the lenders are looking out for high yielding investments. The high yielding investments are those that give a higher percentage of return on the principal than what the other forms of investments can provide. They also want to know of investments that can offset the rate of inflation of their money.
Some of the high yielding investments are forex, commodity futures, mutual funds and stocks. These are some investments where one may receive a substantial appreciation in the value of the initial capital over a very short span of time. But there is a bad side of the story as well. It might also happen that most or all of the money gets lost. Seasoned investors often look out for ways where there are high returns but with almost no risk.
Thus comes the concept of P2P lending. More commonly known as social lending, there is a special website for the P2P lenders. With the help of these websites, the individuals can lend and borrow money directly from each other. There are no financial intermediaries like credit unions and banks. Peer-to-peer lending creates a personal connection between the lender and the borrower and makes the borrowers more likely to repay their debts.
As there are no banks involved in the lending process, P2P lending makes it very much possible for the investors to earn higher returns. The borrowers also get lower rates than the banks and other financial institutions. P2P lending is nothing but employing an online financial community, which brings together the investors and creditworthy investors. This practice is mutually beneficial for both the lenders and the borrowers.
How does it work?
The prospective borrowers and the investors sign up at a P2P website. The P2P lenders choose the profiles wherein they want to invest and after a minimal check-up of the profiles, lend the money.