How does P2P Lending Work

Technically, peer to peer lending is not a new idea, but with the arrival of the internet, it has become much more convenient than it was decades ago. What crowdlending has done is to make lending and borrowing available to a broader audience.

In this post, we are going to cover how the P2P lending works.

How P2P lending works for investors

Peer to peer loans works for investors on two sides. An investor or a lender can read borrowers’ profiles and make a decision based on that what he or she knows if they want to make the loan.

The majority of crowdlending loans are funded by more than one lender or investor. There is usually a minimum amount to invest, but once you deposit your loan, you can select the amount for each loan. This is what is called diversification, which reduces your risk as an investor because if one borrower defaults –and there is always a possibility – you are mitigated from the loss because you have a number of other borrowers who are repaying your loan.

As the borrower makes the monthly payments, a percentage amount goes the lenders until the loan including the interest is fully paid.

How P2P works for borrowers

Peer to peer lending is usually an attractive alternative for borrowers who can’t or don’t want to borrow from traditional banks. While crowdlending platforms have a different process, they are all similar to this:

  • Go through a short series of questions, which is the soft credit check.

  • Based on the answers you have provided above you will receive a loan grade.

  • The investors can review your loan grade and inquiry for them to decide if they want to loan you money or not.

  • When a certain number of investors are interested in your loan, it will be approved for funding.

  • Borrowers provide documentation such as proof of income, employment, and current debts.

  • Borrower’s loan inquiry is reviewed to ensure the provided documents matches the information provided in step one. Lenders can ask for additional documentation.

  • Upon ultimate approval, the loan documents are sent to the borrower, who will be required to sign and return. Once this is done, the funds will be wired into the borrower’s bank account within 24 to 48 hours.

Most peer to peer lending websites allow all this process to be done online; the documents necessary can be emailed and scanned back and forth, therefore streamlining the whole process enormously.

Examples of the best P2P Lending Platforms in Europe

Europe is the frontrunner when it comes to crowdlending platforms, as the concept originated from the continent.

Mintos

Mintos is the leading P2P platform in Europe, offering a huge quantity of loans to invest in. The platform gives both investors and borrowers exposure to a number of countries as well as several types of loans in each country to invest in. That means that you will have diversification for your loans to mitigate risks.

Mintos also offers decent returns to investors with an average of 12% per year. Moreover, the interface is quite easy to use and they also boast a great portfolio manager for users to set everything only once and let the platform do all the work for you. Most of the loans in the platform are protected by a buyback guarantee, meaning you will still get back your loans even if a borrower defaults.

Grupeer

This Latvian P2P platform was launched in 2018 but has grown to become one of the leading crowdlending platforms in Europe. But unlike other sites, the majority of loans available in Grupeer are attached to property development projects. The loans are also protected by a buyback guarantee, which is a nice assurance for investors. The site also features an auto-invest which is easy to set up and can invest in both real estate and peer-to-peer lending loans.

Crowdestor

Crowdestor is a peer to peer marketplace lending platform based in Estonia with offices in the United Kingdom, Germany, Latvia, and Russia. It was founded in 2018 and since then, it has seen over 1,000 investors join.

EAN Content

Content shared by this account is either news shared free by third parties or sponsored (paid for) content from third parties. Please be advised that links to third party websites are not endorsed by Estate Agent Networking - Please do your own research before committing to any third party business promoted on our website. As an Amazon Associate, I earn from qualifying purchases.

You May Also Enjoy

Breaking News

Popping the Asking Price Bubble

Where in the Uk Can Buyers Snap Up Property Bargains and Where Properties Go for a Premium Above Asking Price   New research from fast selling property company, Upstix has uncovered the UK’s most surprising postcodes for snapping up a property at bargain prices this year, highlighting a widening gap between sellers’ expectations and the…
Read More
Rightmove logo
Breaking News

Highest demand to lease office space since pre-pandemic

The latest insights from the UK’s number one commercial property website Rightmove, reveals that the number of unique enquiries to lease office space is at its highest point since pre-pandemic, as businesses look for spaces that meet modern requirements. Demand to lease office space is 19% higher than the same period a year ago and…
Read More
Planning disputes on new build land
Estate Agent Talk

Planning consultations for major infrastructure to be streamlined

Robert Bruce, a planning and infrastructure partner at law firm Freeths LLP, said he: “Welcomed the change as a significant step to speeding up the DCO process and the focus on the quality and effectiveness of the consultation, rather than box ticking and a risk averse approach to pre-application consultation due to the current legal…
Read More
Breaking News

‘The property ladder pulls further away’ warns Open Property Group

For many first-time buyers across England, the dream of homeownership continues to slip further out of reach. Despite rising wages, soaring house prices are making it harder than ever to get on the property ladder. A leading UK professional house buying company ‘Open Property Group’ based in Buckinghamshire UK, has raised concerns over the ongoing…
Read More
Estate Agent Talk

How Long It Takes to Buy a House in the UK: 5 Common Delays That Can Slow Down Your Home Purchase

Wondering how long it takes to buy a house in the UK? The average timeline ranges from 8 to 22 weeks, but even that can stretch significantly due to unexpected delays, especially if you’re a first-time buyer or caught in a chain. That’s why working with experienced professionals like Belvoir — one of the UK’s…
Read More
Love or Hate Rightmove
Breaking News

Rightmove to host Renters’ Rights Bill webinar with Guild of Lettings

Rightmove is hosting a live and interactive webinar session with the Guild of Lettings to help agents get Renters’ Rights Ready. The webinar will take place from 10:00am – 11:00am on Wednesday 23rd April. Susie Crolla, Managing Director for the Guild of Lettings, will be joining Rightmove to help agents with questions they may have about…
Read More