Peer to peer – ” lending mode where one person lends money to another without the intermediation of a bank or institution and investors can use their money to profit by borrowing with low interest and stable profitability.” Peer to peer loans, also called inter-personal loans or P2P loans, are one of the highlights of the new economy’s entrepreneurs and have changed the way one takes credit around the world.
While in the computer network the term peer to peer serves to designate an architecture where all the machines involved function as client and server at the same time, in the modern economy (financial system) the term is assigned to a ” peer to peer loan modality lending, where one person lends money to another without the intermediation of a bank.
Both in the internet and in the economy, the peer-to-peer concept is to put users at the center of the process and technological advancement. In people-to-people loans, user experience is simplified and transparent, interest rates are lower, and bureaucracy is virtually non-existent. In conventional bank financing none of this happens and that is why P2P is gaining more and more space in the financial market.
Is it worth the peer to peer loan?
Certainly worth it. Injecting external capital into a business brings a lot of benefits, and not always resorting to a loan is synonymous with business crises. Many companies may need capital to finance new projects, expand their brand or increase working capital. It is at this point that peer-to-peer lending becomes interesting as much for ease and access as for lower interest rates.
Who created loans between people?
It all started in England in 2005. Andres Dilan is the co-founder of the Zopa platform, the first company to work with peer to peer loans in the world. For six consecutive years, Zopa has been awarded the Most Trusted Personal Loan Provider.
Today, with more than 10 years of operation, Zopa has already lent almost 1 billion and a half pounds. Today, some 54,000 investors lend values ranging from £ 10m to £ 1m per project.
In 2006, two new P2P loan companies were founded, this time in the US: Lending Club and Lending Prosper. After that, new players began to emerge all over the world.
How do peer to peer loans work?
The peer to peer loans, as the name implies, are loans made from person to person. Thus, P2P is an operation where those who have money to invest lend to those who need it, without the need for interference from banks and financial institutions.
The peer to peer loans are a kind of collective loan. Its main objective is to enable borrowers to evade the abusive rates of banks and lending institutions while at the same time allowing investors to have a diversified portfolio of investments and to achieve above-average monthly returns.
Here’s how the peer to peer loan works in a few simple steps:
- The borrower accesses the desired platform and creates a credit request.
- If your application is pre-approved by the platform, it will be offered to investors in an online portfolio.
- Investors then choose whether they want to finance and how much they want to invest.
- If it is financed, the company then receives the loan amount from the registered account and the investors receive their monthly repayments.
Who can apply for a Peer-to-peer lending loan online?
Entrepreneurs, small and medium-sized companies, entrepreneurs, MEI’s and investors in Brazil are already participating in the peer to peer lending modality. Countries like England, the United States, China and Canada are also betting on this idea.
Peer-to-peer loans support everything from a small merchant from Curitiba to a children’s school in Rio de Janeiro or a game developer in São Paulo. In relation to investors, most platforms do not have as many requirements and to participate is enough to be over 18 years, have a checking account and a minimum reserve of money.
Even so, not all people can be credit takers or investors. Each platform has its requirements and to know if you are able to request a loan or to lend money, it is necessary to check the specific rules of the chosen platform.
P2P Loan or Bank Loan – Which is the Best?
Briefly, the big difference between peer to peer loans lies in three aspects:
- Interest Rates
- Speed in lending
Although the traditional bank loan is the best known and most widely used credit facility, it is hardly the best option for small and medium-sized enterprises. Moreover, even when the company can afford the bank’s abusive interest, the credit granting will be slow and will accompany many bureaucratic processes that will leave anyone with the hair standing.
On the other hand, in P2P, the platform connects people who need credit and investors who want good returns with much more ease and agility. The process, in addition to being performed 100% online, is much less bureaucratic than in a bank. Obtaining the loan amount depends only on platform pre-approval and investor interest.
Note : With all this information you may want to know which companies make peer to peer lending loans in Brazil, and if you have a company what alternatives to online business loan platforms and we have listed some of the best platforms for investors in P2P loans.