What is 'Peer-To-Peer Lending (P2P)

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Peer-to-peer (P2P) lending is a method of debt financingthat enables individuals to borrow and lend money without the use of anofficial financial institution as an intermediary. Peer-to-peer lending removesthe middleman from the process, but it also involves more time, effort and riskthan the general brick-and-mortar lending scenarios.

P2P lending is also known as social lending or crowdlending.

BREAKING DOWN 'Peer-To-Peer Lending (P2P)'

Traditionally, individuals who withdraw w88 andsmall businesses who want a loan usually apply for one through the bank. Thebank would run extensive financial checks on the applicant’s credithistory to determine if the entity would qualify for a loan and if yes,determines the interest rate that will be charged on the loan. Individuals thatwant to avoid being charged high interest rates or that would otherwise berejected for a loan application due to poor credit history, may opt for analternative way of borrowing funds – peer-to-peer lending.

With peer-to-peer lending, borrowers take loans to onlineslots Malaysia from individual investors who arewilling to lend their own money for an agreed interest rate. The profile of aborrower is usually displayed on a peer-to-peer online platform whereinvestors can assess these profiles to determine whether they would want torisk lending money to a borrower. A borrower might receive the full loan amountor only a portion of what he asked for from an investor. In the case of thelatter, the remaining portion of the loan may be funded by one or moreinvestors in the peer lending marketplace. In peer-to-peer lending, a loan mayhave multiple sources and monthly repayment has to be made to each of theindividual sources.

M88 platforms connect borrowersto investors with attractive interest rates. For lenders, the loans generateincome in the form of interest which can often exceed the interest amount thatcan be earned through savings vehicles, such as saving accounts and CDs. Inaddition, an investor is able to earn a higher return on his investment than hecan get from the stock market through the interest payments he receives monthlyfrom the borrower. On the other hand, P2P loans give borrowers access tofinancing that they may not have gotten approval for from standard financialintermediaries. Furthermore, a borrower gets a more favorable interest rate onher loan than one she would otherwise have gotten from a bank.  

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