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What is p2p lending- How does it work?

06 Nov 2020

Definition, features and benefits of Peer-to-Peer Lending In the next blog post we will explain what p2p lending is, what are the benefits of using a p2p lending platform, as well as where to start. What is p2p lending? Meaning, definition Peer-to-Peer lending (p2p lending) is a simplified form of lending in which the borrower-lender relationship occurs directly. This type of "crowdlending" is most often done through platforms, which are good alternatives to traditional financial services. Globally, the method is gaining popularity due to the significantly more favorable conditions it offers compared to banks. Recent trends in the financial sector point to p2p lending services as a major competitor to traditional lending and investing methods. This financial alternative is a preferred investment option, which transforms the concept of "lending. Many experts believe that this method will completely change the financial culture of the future. Official studies on the growth of peer-to-peer lending show that the concept has the potential to develop drastically in the coming years, as its progress is of great economic importance. Read on to find out more about p2p lending and how it works.

How does p2p lending work? Platform features explained

P2P Lending is a lending practice that has established itself worldwide. In the last 5 years it has gained great popularity on the European markets. Today, it is used mainly by small and medium-sized businesses looking for financing, as well as by entrepreneurs interested in investition opportunities.

The business model works like this:

Investing in p2p lending

Anyone who wants to lend receives the opportunity to do so via p2p lending. But before starting you need to find a platform that suits you the best. We suggest you always look at the terms and conditions.

After signing up you will go through an approval process. Once you get in, you’ll receive access to all active credits. It is up to you what loans you will finance. Today, innovative p2p lending platforms allow you to choose what percentage you want to invest, and for what period of time. As an investor you can even specify other important details about the loan conditions.

Simply put, the logic of p2p lending is as follows - the longer you invest your savings, the higher your return will be. When you are an investor in a p2p lending platform, you buy the interest rate of the use of your savings. That means you’ll receive your principal and interest on a monthly basis.

Borrowing with p2p lending In case you are in a need of a loan, then p2p lending can serve you a lot of great benefits. First of all, you should pay attention to the fact that you will not be charged aimlessly. Online platforms are well known for saving time and resources. The process of signing up and applying for a loan is much faster and easier.

Peer-to-peer lending allows you to take a loan even if you have not accumulated a high "credit score" according to bank standards. That way you have a good chance of getting the funding you need. These prerequisites allow for much better conditions for taking a loan than banks.

Once you receive approval from the platform, you’ll be connected to investing meeting your needs and time requirements. You will then receive a clear explanation of what follows until the end of the transaction.

Benefits of Peer-to-Peer Investing

Choosing the right platform is key to your success.If you are looking for a reliable solution to increase the amount of your savings, it is worth paying attention to HelpLending.

Here are some of the major benefits of Peer-to-Peer investing:

● Buyback right on time Secure platforms give investors access to loans with guaranteed buyback by the originator. Watch out for platforms that strictly adhere to the redemption period.

● Loan diversification In order to provide stable financing, each loan should be divided into separate parts available for investors. To ensure diversification, lenders can choose how many "parts" to invest in, as well as in how many loans to give out.

● No additional operating fees This is possible for several reasons - first, p2p lending platforms function online. Thus, the operating fees that banks traditionally charge from their customers are completely meaningless. HelpLending, for example, does not rely on advertising to reach potential investors. Instead, the platform uses a referral program.

● Money control With the option for full manual control you can regulate where, how much and for how long you give out your amounts for loans.

● Automatic investment option An increasing number of platforms like HelpLending now have an option for automatic investing. That way you can set your requirements in advance and let the platform itself “match” you with the right borrowers.

● More favorable conditions for all Overall, P2P lending platforms provide better conditions for everyone - both those in need of credit and investors. This is a good alternative that removes the restrictions and fees imposed by banks and other financial institutions.

Tips for p2p lending - How to get started?

Peer-to-Peer lending is a practice available to all people and businesses. All its restrictions on obtaining or lending credit are related to essential security considerations that ensure stability. The alternative is a good fit if you want to invest accumulated capital or take a loan for business or personal purposes.

Before making your first steps in the world of p2p lending, we advise you to be careful when choosing a platform. Always familiarize yourself with all the conditions for both taking and investing. Aim for platforms with greater autonomy capabilities. Choose periods that are convenient for you and do not limit your portfolio to just one loan. But most of all - be prudent with your savings, whether you are an investor or need a loan.

Take a look at the opportunities that HelpLending offers to its investors. Take advantage of this strong opportunity and give your savings a chance to pay you back. With an easy interface and clear conditions, the platform allows you to invest successfully even if you are a beginner in p2p lending.