P2P Lending
Do you want to know an innovative and versatile way that explains how money is lent from person to person? As an unconventional or untraditional or nontraditional method, Person-to-Person Lending or Peer-to-Peer Lending is also known as Social Lending. This occurs between peers or individuals or person-to-person
lending directly and does not involve traditional or conventional financial institutions. This evolves with two modules, such as the 'family and friend' model that goes through
lenders and borrowers who know each other and an 'online marketplace' that takes place on the Internet.
With the advantages of Person-to-Person Lending, the participating individuals have control of the capital that contrasts strongly against banks that do not allow the individuals who actually own the money to have a say in allocation of funds. Person-to-Person Lending also involves Community Lending where an intra-group is connected socially or otherwise with the participating parties which enables increased financial responsibility and quick repayments. This unique mode of lending also comes in the form of Secured Person-to-Person Lending where collateral is involved. The collateral secures the lender's interests and the risk management is low. Unsecured Person-to-Person Lending is based on the borrower's credit rating though the lender does run a risk of losing interest and capital.
Person-to-Person Lending also comes in the form of Pooled Lending where the money is lent to a pool of borrowers. The risk for the lender is less as the system resembles that of a bank where the lender cannot chose individual borrowers. Direct Lending involves a good credit rating that enables a borrower to get money though the risk is greater for the lender. By incorporating the rule of limited investments into many loans, lenders have lessened the intensity of risks. With many modules of Person-to-Person Lending, individuals, entrepreneurs and groups of borrowers have succeeded in acquiring loans that have enabled them to meet financial needs.
Shankar YH has published 7 articles. Article submitted on Wednesday 05th May 2010. Word count: 312
