Peer To Peer Lending

Peer To Peer Lending

What is Peer TO Peer lending?

Peer to Peer lending (P2P lending), is the online way for matching individuals or businesses that want to borrow money with lenders. A peer-to-peer loan is the same as any other unsecured personal loan, the only difference is that you are borrowing the money from an individual or group of individuals rather than from a financial institution such as a bank.

Why would I want one?

For some people borrowing via a peer-to-peer lender is done for personal, ethical reasons and because it allows them to avoid doing business with banks and building societies. Most of the big peer-to-peer lenders in the UK market offer flexible loan terms such as choice of repayment term and/or no early repayment charges. This is not the case with most traditional loan providers.

How does it work?

Everything is done online. You apply, are assessed and then either offered funding or not. Because these are run entirely online they have much lower overheads and can therefore offer better terms than the traditional lenders.

What can they be used for?

They can be for many different areas including general business expansion, stockholding and for the purchase of commercial property.

Are they regulated?

From April 1st 2014 the peer-to-peer lending industry became regulated by the Financial Conduct Authority. The regulation requires peer-to-peer lenders to have minimum operating capital requirements, meet client money requirements and adhere to a disclosure based regime.

What are the pitfalls?

There aren’t any as these loans are totally unsecured. In order to get P2P lending your business plan and prospects would have to be sound and you would need some form of track record of management. Credit checks are very stringent.

 


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