Important Facts On Peer To Peer Lending

Borrowing money in today's economy is becoming more and more difficult, especially for those individuals who either have low credit or high debt with high credit. Borrowing is becoming even more difficult to those who own a small business; banks are tightening and changing their requirements so much that it is extremely difficult on small businesses. High interest rates on credit cards for many individuals does not help out the situation either.

There is thankfully a new form of borrowing and lending that is becoming very popular in today's economy; this new form is called peer to peer loans. In certain areas the idea of peer to peer lending has a different name, like person to person lending or social lending, but the main idea of the borrowing and lending technique is always the same. Peer to peer lending uses competitive interest rates and financial mechanisms to allow individuals to lend each other money in a secure and safe way. Peer to peer lending is perfect for those who are able to see the risk of letting ones you know borrow money; there is the chance that you will never see that money again.

What peer to peer lending all boils down to is the fact that virtually anybody can borrow money at decent interest rates from virtually anybody else. Though this may seem a little more risky than borrowing from friends or family, the fact of the matter is that it is actually much safer. The concept of peer to peer lending is actually rather easy to understand; let's take a look.

The best way to start your peer to peer lending process is to go to one of the many reputable peer to peer lending network sites. These peer to peer lending network sites give borrowers the option of receiving a simple loan with interest rates much lower than those found at banks and credit unions. Borrowers are usually offered either a one-year, three-year, or five-year fixed rate loan from these companies with interest rates ranging right around six percent. Individual investors are the key to keeping these lending company's interest rates so shockingly low.

When it comes to bank lending, savers in the bank are the main providers of money to the borrower. A bank will usually charge interest rates of anywhere from 7% to 30% and keep all of the difference. In order to save borrowers money, peer to peer lending networks take out the middle man of which is usually the bank. After taking the bank out of the equation, the borrower is left with much lower interest rates.

If you are looking to lend, and not borrow in peer to peer lending networks, the process is extremely easy. You should always check your state's regulations before beginning the sign up process to become a lender in a peer to peer lending club network. A lender can now begin the quick and easy process of signing up. Once the lending account is set up, their funds can now be easily transferred to other accounts. The lender will automatically receive portions of the borrowers' payments on the loan as they are made. In the end, both borrowers and lenders win.