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Peer-To-Peer Lending

At a time when many people are in need of a loan and people with money are not getting a reasonable rate of interest from the banks, it makes sense that there will be peer-to-peer loans. It is simple to do and there are many sites that will linkup those who have money to lend and those in need of a loan. Credit checks are still carried out, but they will not be the same as those made by the banks. Due to the lower overheads of the companies that are accommodating this service, the rates will be better than applying to a bank. In Great Britain this system has been in existence since 2005 and has provided upwards of £400 million to customers. In the United States, the first company started trading in 2006 but it was not until 2009 that there were loans issued across borders.

Unsecured Personal Loans

In effect, this is what a peer to peer or P2P loan actually is. It is normally an individual who will apply rather than a company, and there is no need to put anything up as collateral. This will be a relief as many people will be fearful of applying in case they ended up losing something valuable over what would be a small loan. The lender does have a say in the interest rate they will charge, but they will have to keep it low or other lenders will be selected rather than them.

High Or Low Risk Lending

If a borrower is considered a risk as they may default, they will not be offered the lowest rates. The lender also chooses whom they will lend to so will not be in a position of being assigned all high-risk applicants. It will make sense to provide small loans to a variety of people, as there is more chance of getting repaid this way. There is an element of risk for the lender, as the government or any banking organisation does not cover this system. The companies that set up the system will take a fee and this will be decided largely by the amount of the loan when it comes to the lender – the borrower will pay a one off fee. If the company goes bankrupt and ceases trading, the lender could find that they will not get repaid.

With peer to peer lending there are a number of things to take into account. Firstly there is no real knowledge of the person you are lending money to or borrowing money from. There is a company involved, albeit online, so there is a payment required on top of the interest added to the loan. They do carry out services for their fee as they carry out checks on borrowers –tends to be checks regarding employment- and also act as go between when repayments are made.

There is just as much risk of an applicant being refused a loan this way as there would be with a bank or building society. Lenders do have a great deal of say when it comes to whom they will lend to and borrowers need to be aware that the loan can be sold on.

Today’s guest post is authored by Leo Wright. He is a blogging enthusiast who enjoys sharing his views and interests through his articles. You can now get a fast cash loan the same day with no faxing, here at CashIn30Minutes.com.

Tim Esterdahl

Tim Esterdahl is the editor of IFCS blog. He is a married father of three and enjoys golf in his spare time.

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