More and more consumers are turning to peer-to-peer lending services as a solution for their borrowing needs. This trend is a direct result of policy decisions banking and credit cards. First, consumers face increasing challenges with the tighter lending environment.
Consumers are better able to secure a personal loan or wind up paying less than the desired rate. In addition, credit card companies have lowered credit limits, increasing the penalty fees and raise interest rates.
Peer lending services compete with traditional banks and credit card companies because they do not have the same overhead and operating costs as brick and mortar counterparts. As a result, they can pass these savings for the lender and the borrower in the form of lower service costs and higher profits.
Peer to peer is also known as crowdfunding some times. If you want to read about crowdfunding in detail, here’s a source for you – ‘Crowdlending Guide: What is it and how to invest’?
In addition, the service offers a variety of possibilities for consumers with different credit scores. For example, those who have a good credit score can borrow a higher amount at a lower interest rate.
This does not mean that every borrower receives the loan. The borrower must still meet certain requirements before receiving a loan. By having the screening process the loan, the risk to investors is minimized to some degree.
For investors, the main attraction of loans is that there is a chance to get a higher return than they would receive in traditional savings or certificate of deposit.