P2p loans between private individuals are a growing market. You can borrow personal loans from private individuals through Good Lender. There are also small loans via p2p platforms, such as loanstep which links p2p borrowers with investors for as small amounts as USD 1000 and up.
Then these p2p loans work like any quick loan or sms loan. Loanstep even offers interest-free loans of up to USD 5000 for 14 days. These free and short-term loans are otherwise typical for sms lenders. Savings loans are another popular p2p platform for unsecured private loans. The loans are invested by private individuals and borrowed by other private individuals.
That’s what p2p is for something: loans between private individuals
The similarities between regular private loans and p2p loans are many, in fact there is not much that separates them. There are p2p companies that let the lenders themselves choose whom they want to lend their invested money to. If you borrow from one of these p2p platforms, it may take a while before you get the money you want to borrow.
Some may want to lend you money. It takes even longer if you have a bad credit rating. If you are not considered creditworthy then you will not be able to borrow at all. The entire credit risk lies with the investor. Good Lender keeps all information about who lends to whom secret and instead spreads its investors’ money in over 30 different loans to at least 30 different lenders. This is to minimize the risk.
The p2p loans that have a short maturity function like ordinary sms loans
The larger loans that Sparlån and Good Lender pass on function like any private loan, no collateral is required and they have a longer maturity. Good Lender focuses on this type of p2p loan. If you want to lend money p2p, there are some things to know. The interest rate, for example, is many times better than if you put the money in the bank when you invest. P2P has become a popular magazine for those who want a good return on savings capital. Those who lend money may be offered lower interest rates are with some other credit lenders.
Your invested money is spread among many borrowers so you don’t have to worry about making big credit losses. If a debtor does not repay the loan, it is you as the lender that makes the credit loss. This is because the bank as intermediary is removed and you act as lender.
You then take the credit risk
But you don’t have to worry about losing money because the money is spread out to so many different loans. In the worst case, you make 2 – 5% in credit losses and that means you still get a good return due to the high interest rate you earn. At Good Lender, you can earn up to 8% in return, but their credit losses are only 1%. This may be good to know for you as an investor.
The companies only pass on your money so if the p2p company goes bankrupt you will not get rid of your investments. However, it may be wise to investigate which bank your money is deposited in because if it is with a bank that is not covered by the stale deposit guarantee and this bank goes bankrupt you can still suffer. P2P companies cooperate with a bank where the money will be deposited. If we say that you make a credit loss of 2% when you invest USD 40,000 and you get 10% in interest, you lose USD 800 because of the credit loss but you still lose USD 3920 plus at the interest rate with the remaining USD 39200, this means that you still earned USD 3120 in a year despite the losses. Try investing in p2p now and start making money from you too.