Here’s Everything You Need To Know About P2P Lending

Have you heard of P2P financial tools — but are not really sure what they are, and how it all works? Wouldn’t mind earning some passive income — but the idea of P2P sounds a little too complicated? Well, let us end this myth once and for all: P2P lending and P2P investing aren’t complicated. It can be really simple — with the right platform, of course. Here’s all you need to know about P2P financial platforms before you get started!

What is P2P lending and investing?

Let’s start by defining what P2P finance is. In a nutshell, P2P (or peer-to-peer) finance can be described as connecting borrowers who are looking for loans with lenders who want to invest their money in those loans. This process excludes traditional financial institutions and is often facilitated by P2P lending sites.

For the purpose of this article, let’s clarify the following terms:

P2P lending (P2PL) refers to the process of financing (i.e. of the received loan application) which allows individuals to lend and borrow money without using a traditional financial institution (i.e., banks).

P2P investing (P2PI), on the other hand, can be defined as the process of investing your money to those who are requesting a loan.

Because it is a direct exchange between the lender and the borrower, the process doesn’t require the involvement of banks and financial institutions. The P2P platform acts as an intermediary. It facilitates the process of lending and ensures controls protecting both parties are in place. They work to make the experience of lending and borrowing as smooth as possible, as well as determine their clients’ credit rating.

P2P finance is a form of alternative finance — which we’ll explain next.

What is alternative finance?

In the past, businesses and individuals who needed loans or wanted to invest their money had to deal with banks and other traditional financial institutions to carry out these financial tasks. The process was slow, tedious, and somewhat draining.

But that’s no longer the case — or, at least, users now have a choice. The financial services industry is transforming rapidly — and there are superior financing options available for those who want to make their money go further, without the complexities that a traditional financial institution would involve.

How can alternative finance platforms be defined? We think this definition from Investopedia captures it most accurately: “a more efficient intermediary in the supply and demand of capital, leveraging technology to operate online.”

Alternative finance includes the likes of crowdfunding, alternative lending, and other financing models. It uses major tech and electronic communication advances to create a more efficient and accessible way of investing for businesses, individual lenders and borrowers — particularly those who may not have substantial sums to start with (Fast Invest is an excellent example of that).

How does P2P investing work?

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Read the full article at Fast Invest Blog

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