Learning the Basics of P2P (Peer-to-peer) Lending

Anytime you borrow money or take out a loan, it is important that you carefully consider if it is the right decision for you. When taking a loan, you are committing to pay the money back within a specific amount of time incurring interest. Perhaps you heard about P2P lending.

Although a new concept, P2P is becoming a preferred alternative when looking for a loan. With this, it is not a surprise that it is gaining massive followers. But should you trust P20 over conventional lenders? To understand it better, it is time to learn the basics of P2P.

What is P2P lending?
P2P lending is when businesses or individuals apply or bid for a business or personal loan. Investors that are facilitated by third parties like HittaSMSLan usually provide the loan. You have to know that the third party is commonly referred to as an online-based marketplace or platform.

HittaSMSLanHow does this work?
For investors, they can choose how much they want to invest. Oftentimes, they will also decide what type of loan their money will be utilised for. The online-based platform will function by pairing the investors with borrowers. After the pairing, the investors need to review the application of the borrower and chose what they like to support financially.

For the borrowers, whether it is an individual or a company, they need to apply through the online-based P2P platform. In the platform, they will put necessary details like credit history, employment, assessed income, and personal identity. If the platform thinks that you are an ideal borrower and they approved, they will then pair you with one or more investors who are willing to fund the loan. The interest rates are personalised, which is dependent on your credit history.

What are the different types of loans?
The type of loan and fees will be dependent on your preference – this is to ensure that you can repay it according to your capacity. Here are the different types of loan:
• Personalised rates: for this, the lender will use the personal information of the

borrower to decide the interest rates.
• Secured loan: this involves utilising an asset as security in the event that the borrower will default payments. The assets include vehicles, art, jewelry, house, land and other properties. For this type of loan, the lenders will offer lower interest rate because they are less risky.
• Unsecured loan: the borrowers can take out a loan without providing an asset as a form of security. This will pose a higher risk for the lender that is why the rates are higher.
• Variable loan: if you expect that the interest rates will drop, the variable loan is a good choice. It also offers features like extra repayments without fees.
• Fixed loan: this is a type of loan where the borrower can lock in the interest rate for the duration of the loan period. The repayments will stay the same. This is beneficial to protect you from increasing rates.
It is important that you understand everything to make a smart decision at the end of the day.

Comments are closed.