P2P Lending VS Traditional Bank Loans
Are you in need of money? The reason can be for improving one’s current business and for buying a vehicle to their farm or for renovating their house. Traditionally, people will approach banks or local money lenders in order to get help to acquire these things. In recent days, there is a lot of buzz about peer to peer lending. Companies like Milaap, Randge have dominated the P2P lending market and are increasingly becoming more popular. Both processes are different from each other, and I will try to list out their pros and cons.
The funds that are collected from crowdfunding platforms grew from billion $6 in 2013 to billion $16 in 2014 and $34.4 billion in 2015. It is estimated that by 2020 the market for crowdfunding platforms is nearly 1 trillion dollars.
According to World bank Statistics
Traditional Bank Loans:
If any individual wants to seek loan from the bank, they have two options
Secured Loan:-
Banks will offer loans to a person if they give anything for collateral such as property or gold. Usually, the value of the loan is directly proportional to the value of their collateral. If any individual is falling to repay the loans, banks will auction the collateral and recover the bad debts.Unsecured Loan:-
Commonly Known as Personal Loan, Banks will offer loans to working individuals or business owners buy their previous credit history. Usually, the loan value is less, and the repayment tenure of such loans also be small. Interest rate will be high when compared to secured loans as there is risk to capital
Peer to Peer Lending:
In India, Peer to Peer lending is in evolution stage where lenders are interested in investing in social projects such as lending to a farmer for upgrading his livestock and for a student to complete their education. Organizations such as Lendbox is providing loans for personal use on their platform, connecting both lenders and borrowers with great benefits. In a typical case, people use peer to peer lending platforms because the loans are too small and banks are not interested in giving them as they cannot make any interest out of that, or they do not have any collateral and previous credit history.
Peer-to-Peer lending platform enables individual to borrow money from a group of lender without any financial institutions. The platform allows individuals to get a loan without any collateral and the interest rates are less when compared to traditional bank loans. Borrowers will quote there purpose and required loan amount and also the repayment tenure to lenders. These P2P lending organizations will partner with local NGO’s and manage the field operations such as credibility of individual and collections of installments.
Conclusion:
Image Credits - Modified
In majority cases, P2P lending is more advantageous to borrowers when compared to bank loans. Secure loans are securing only banks but not people. Again there is some ambiguity for higher value loan requirements, and shortly we will expect a solution to fulfill this requirement. In P2P lending any borrower can repay their loans in advance before agreed duration. But this is not the case with bank loans borrowers need to pay total capital and some penalty to recover the interests.
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I think P2P lending would work better in a lot of ways. If I may ask, in a P2P lending situation, what is the appropriate action to take should someone "default" on their loan?
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STOPIf getting a $400 loan no credit check will help you to solve your temporary financial difficulties, you should apply for it.
It may take you time to find a reputable lender that will offer good conditions for you, but it is possible. Just make sure to read conditions carefully before signing a loan agreement and avoid missing payments.
Thank you all for the info!
Hello! Recently I have been searching for information on this myself and I recommend contacting Credit 9 Lending for professional advice. The key to P2P lending is the cost of money. A traditional financial institution by its very nature has a cost of money and works to make a profit on the arbitrage. Whereas P2P lending does not have any cost of money to the Market Place and to the individual who is investing it is his income.
I was in urgent need of some extra cash, and ImprumutNet came to the rescue! Their online platform made it incredibly easy to apply for a loan, and I received the funds within hours. Thank you for providing such a quick and efficient service!
Peer-to-Peer Lending (AKA P2P Loans or Crowdlending) Explained in One Minute