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Reasons behind the Emerging Industry: Peer-to-Peer Lending Peer to peer lending is an emerging option for loan transactions wherein you can apply for any type of loan such as but not limited to personal loan, car loan, student loan, business loans, and even for the sake of consolidating your loans. If you choose P2P, you are choosing an emerging source funds for your future. This is even a fast growing industry wherein people considered it as their best options instead of looking for other means. The borrowers will let the bank find the lender. On the side of the lenders, their basic task is to perform due diligence so that there will be proper credit checking and they also collect payment. 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? It has a lot of benefits. One reason for this is that it helps in the consolidation of your debts. Most of the time, the rate charged flower you is a bit lower compared to other forms of consolidation and you can even payoff the loan in the end of your term. Next reason is the fact that funding is easy to locate. 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. Your loan will go through a market place for potential lenders. 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. Credit cards even offer higher interest rate but P2P is lower and has fixed rate.
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But why is peer to peer lending very popular to lenders? The main reason is the return on investment. You will enjoy the rate of return between 6% to 19%, according to reports. The range of return in terms of percentage is indeed very high compared to other investment companies. Another reason is the fact that they have preventive measures to avoid default by means of credit screening. The default rate should not exceed 2%. It is in fact low despite the fact that you are applying for unsecured loan that has no collaterals as support for the loan availed. Also, lenders are not allowed to stop funding because lenders must fund more loans.