Types of Peer-to-Peer Loans
- May 25, 2016
- 2 min read
Peer-to-Peer Businesses Loans
In the past, small businesses have relied almost entirely on banks for funding. However in recent years, this has changed as banks have tightened their lending criteria and alternative sources of funding like peer-to-peer lending, became available.
Business P2P lending platforms such as www.crowd4funds.com have made it much easier for businesses to get funds directly from individuals through Peer-to-Peer Businesses Loans.
The businesses are classified by risk level and lenders can choose the level of risk they are willing to accept. With small minimum loan amounts, individuals are able to diversify their investment across many different businesses further reducing the risk.
Even allowing for the platform's fees and any defaults, lenders can get a higher return on their investment from P2P lending than they can with a bank savings account.
Peer-to-Peer Personal Loans
Creditworthy individuals can now get competitive access to finance via P2P lending platforms such as ZOPA. These allow individual investors to receive attractive rates of return by lending to others.
Typically a lender lends money in small amounts to a number of peers via the Peer-to-Peer Personal Loan platform. By spreading their lending across multiple borrowers the lender is able to reduce risk. In return, they receive monthly repayments of capital and interest. The P2P Personal Loan platform makes money by charging a small fee.
Auto Peer-to-Peer Loans - You can borrow money to purchase a car, but the loan may not be officially a car loan.
Student Peer-to-Peer Loans - With student loans growing exponentially in recent years, peer-to-peer sources should only increase in the years ahead.
Bad Debt Peer-to-Peer Loans - Some Peer-to-Peer lending platforms are making credit available to borrowers that banks might consider as having either fair or poor credit.
Medical Peer-to-Peer Loans - As deductibles rise, and as certain treatments and procedures are disallowed by traditional health insurance policies, the need for medical financing is growing. Generally speaking, medical financing is available on peer-to-peer sites to cover the growing list of expenses that health insurance doesn’t cover.
Asset-backed Peer-to-Peer loans
Asset-backed peer-to-peer loans are the newest type of P2P lending. In this case, individuals invest against assets held as security in order to get back their capital plus interest. Depending on the p2p lending platform, assets can include property, jewellery, art, vehicles, e.t.c.
Asset-backed lending is theoretically more secure than non asset-backed because if the borrower defaults, the P2P lending platform will sell the asset and use the proceeds to repay the lenders their capital and interest.
Equity crowdfunding
An alternative to debt-based investing such as P2P loans is equity crowdfunding, where investors invest in unlisted companies and in exchange receive shares in those companies.
Peer-to-peer lending is growing fast, and as it does, there are more types of loans available than ever before. If you’re looking for a loan, be sure to check out popular peer-to-peer lending sites to see what they have available.
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