Business and Management

Peer to Peer Lending Introduction

Peer-to-peer lending or P2P lending is defined on Wikipedia by defining it as "the method of loaning money to non-related individuals, also known as "peers" and not going through an intermediary in the traditional sense like a bank or another traditional financial institution". According to the definition, it's an alternative method of lending in which people lend to others. 

The practice has been in practice since the beginning of time, but the concept has gained recognition due to the emergence of numerous platforms, mostly online which facilitate loans between individuals. You can also take a look at to know more about peer-to-peer lending.

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A P2P loan would require a willing lender and a willing loan seeker (borrower) who reach an agreement on certain conditions such as Duration, Interest Rate, and so on. A borrower could have a variety of reasons for taking out the P2P loan instead of traditional loans. 

A comparison of the different ways through which loans could be obtained based on various criteria could be helpful to those seeking loans to determine the best way to obtain a loan. For lenders, P2P lending is an investment tool that is quasi-fixed in that it has the borrower with a fixed return.

Prior to the advent of P2P platforms, individuals would accept short-term interest-free loans from individuals who were either directly or indirectly recognized by them. This was a problem for both loan applicants in the terms of social stigma, doing a favor or short-term durations, as well as for lenders because of a lack of legal contract, absence of returns, etc. 


Doug Parks