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Reasons behind the Emerging Industry: Peer-to-Peer Lending If you are a person who is looking for ways to grant your loans such as auto loan, study loan, business loan, or for your debt consolidation, an emerging option for you nowadays is the peer to peer lending. Despite being new to the business world, P2P has still attracted lots of people. This is even a fast growing industry wherein people considered it as their best options instead of looking for other means. Borrowers will assume that the bank can help them find a lender. Lenders, however, focus on more important factors such as conducting due diligence through credit check as well as the collection of payments. The credit checks conducted by the lenders will help them reduce their risk but as well being able to determine the highest amount that can granted to the applicant.
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Why are more people patronizing the peer to peer lending? There are a lot benefits from it. One reason for this is that it helps in the consolidation of your debts. You can even get a lower rate compared to other means of consolidation your loan and you are capable of paying the loan based on the term of the loan. Your next reason is the ease of seeking for fund. If you are planning to start your own business and you need to apply for a loan, going to the bank might just not be a good idea. But having P2P only means that they will look for you. The funding of your loan depends on the selling stage of your loan in the market place. Next, in terms of the interest rates, this type of lending provides lower rates. It is reported that most lending sites offer 6% rate but will still depend on your credit standing. Compared to credit cards, the rate is lower and it is not subject to change.
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But why is peer to peer lending very popular to lenders? The main reason is the return on investment. The rate of 6% to 19% are basically the rate of returns as per reports of the lending club. The rate of return your enjoying is definitely very high compared to other forms of investments. Another reason is the fact that they have preventive measures to avoid default by means of credit screening. The list of defaulted accounts must not exceed 2%. This is already low even if the loans are unsecured and no collaterals were presented. That is why lenders are forbidden to limit their funding to one loan application.