Peer-to-peer lending is the process of lending money to someone directly. There’s no metrobank direct or office that will oversee or dictate the process – except the lending area’s authority. Most of the time, P2P lending allows you to take on the role of a lender, servicing dozens of borrowers. The site will only require that you pay a small percentage. With demand for loans growing rapidly, the importance of P2P lending is becoming more prevalent.
Here are the advantages of relying on P2P lending sites:
Higher Returns for Lenders
Since a P2P lending site has greater flexibility with lending and borrowing processes, there’s a potential for higher returns. According to some experts, returns in a P2P lending site are a bit higher than what banks are making. This is because of the number of borrowers who are entering a P2P lending group. With more transactions, the lender can gain advantageous returns in a short time period.
Quick Sharing of Information
Unlike other lending channels, the information relay in a P2P lending site is quicker. Whenever a borrower leaves a review in the P2P channel, other borrowers will know about it quickly. So, lenders with bad reviews won’t be able to conduct efficient transactions in the site. Worse – these lenders might be booted out by the P2P site’s administrators. The same notion can be applied to the side of a borrower. If a borrower is not a good payer, then his loan applications will be declined most of the time.
Better Risk Management
Whenever a lender is approving a borrower, the propensity for risk is always present. This is why most lenders are asking for collateral and they have stringent document collection processes. Despite this risk management options, some borrowers manage to escape their responsibilities. In P2P lending sites, lenders can easily manage their risk. With information flowing freely in the P2P channel, lenders can decide if they’ll release a loan or not. Since lenders are investors in a peer to peer lending group, the site administrators can present them with multiple options to manage their risks.
Without a central mediator to oversee processes, P2P transactions are relatively faster. If you need a loan quickly, your money can be released within the day, but you need complete requirements. However, not all P2P lending sites have the same level of speed when it comes to loan processing. Some sites are faster, while others are slower.
Before choosing a P2P lending site, make sure that you’ve done your research. Not all P2P lending sites are exceptional and some may cause you to lose money if you’re not careful. However, all lending sites have their share of risks – it all depends on how much risk you can take as a borrower or as a lender.