In 2005, Zopa, the first peer-to-peer lending, was launched in United Kingdom and today, there are over 20 companies providing unsecured loans to borrowers globally. Several of these lending firms specialize in micro lending and student loans, but there are some bigger companies such as Prosper.com and Lending Club that loan money for a wide variety of purposes.

The rapid growth of peer-to-peer lending, commonly referred to as P2P lending, is attributed to the benefits it offers to both borrowers and lenders over the traditional model of financing.

Benefits to Borrowers

The main benefits for the borrowers include easy application process, lower rates of interest and quick funding.

Easy and Simple Application Process

Enter required personal information into the form listed on the website of a P2P lending firm, and you may get approved within a few minutes.

Rate of Interest

Perhaps the major benefit of getting unsecured loans from these peer-2-peer lending companies is reasonable rate of interest. The leading lending firms charge about seven percent APR on the money borrowed. They offer one-year, three-year and five-year term loans to their approved borrowers. The interest rate is charged according to the term chosen.

Quick Funding

Depending on your loan amount, the funds are deposited into your account between one to three weeks. Most of the small amounts that are below $5,000 can be filled in a couple of days, and money transferred to the borrower’s account with a week.

Benefits to Lenders

The peer-to-peer lending is not only beneficial for the borrowers, but it is also advantageous for the lenders. The key benefits of P2P lending for investors include getting high rates of returns on their investment and spreading of the risk.

Higher Returns

Subject to the loan types, the returns on the money invested by the lenders average around 10 percent. In today’s economic scenario where traditional financial institutions such as banks pay around three percent on savings accounts or certificate of deposit, this 10 percent is quite rewarding for the investors, particularly when the risk is spread over a number of pre- qualified, and FICO verified borrowers.

Peer to Peer loan programs can be beneficial to borrowers and the community member lenders involved with these programs. Eliminating the need to obtain personal loans, cash advance, payday and credit card advance loans, will help reduce the potential of borrowing money at super high interest rate levels. With lower rates, consumers have more manageable payments, ensuring that lenders are more likely to be paid back on time and in full.

You can utilize these resources to research more information on payday advance loans or online payday loan lenders.

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