Best Peer to Peer Lending Platforms
The peer to peer lending concept started in the United States in February 2006 with the launch of Prosper. This was followed by Lending Club which paved the way for different lending platforms.
Peer to peer (P2P) lending is a way of debt financing that lets individuals borrow and lend money without using an official financial institution as an intermediary.
It makes a trade by removing the middleman from the process, but, in return, it involves more time, effort and risk than a regular lending scenario.
Upstart is a P2P lending platform with a twist. Upstart was founded in 2012 by Dave Giroud with Paul Gu and Anna M. Colson as co-founders. On Upstart, loan eligibility is decided by more than your credit score. Factors like the school of graduation, academic performance, the area of study, and work history all play a role in determining your loan eligibility. It is popular amongst the younger generation because younger people do not have a long credit history which makes it hard for them to get loans the conventional way.
2. Funding Circle
Funding circle focuses exclusively on small businesses in the United Kingdom and the United States. When the U.S. co-owners were rejected for a loan 96 times, they decided to create a solution for small business owners resulting in Funding Circle. It has given out $5 billion in loans to approximately 40,000 businesses around the world. It has a large investor base- 71,000 retail investors, financial institutions, banks, and the U.K. Government.
3. Prosper Marketplace
As already mentioned, Prosper Marketplace was the first P2P lending marketplace in the United States. It has funded over $12 billion in loans and supports a large member base of 810,000 people. Home improvement, vehicle loans, bridge loans, and engagement ring financing are just a few of the loans that Prosper offers. They offer loans with ratings which are based on the expected return and risk. The company has claimed that the average borrower on their marketplace has a FICO credit score of 710 and an average annual income in excess of $96,000.
4. Lending Club
Arguably more recognizable than Prosper, Lending Club has facilitated in excess of $38 billion in loans as of August 2018. Lending club grades loans from A to E. In their ecosystem, “A” loans offer the lowest risk resulting in the lowest returns. Inversely, the higher the risk is, the higher the returns are which leads to investors being able to construct a portfolio offering risk and returns based on their own comfort level. Similar to Prospect, Lending club makes money by charging originating fees which range from one percent to six percent.
Peerform is a P2P lending marketplace built for accredited investors and institutional investors. Cross River Bank makes the loans and provides the underwriting criteria. An interesting thing to note is that Peerform has developed a Peerform Loan Analyzer because they do not believe that the FICO score by itself is enough to measure risk. The Peerform Loan Analyzer enables individuals with credit scores which go as low as 600 to be able to secure funds. They fund debt consolidation, installation loans, wedding loans, home improvement, medical expenses, and a host of other loans.
Despite these being the best of the best, there are many other P2P lending platforms that work like magic for borrowers and lenders alike. If you are interested in venturing into the P2P network, it is worth your while to do your research on which platform suits your needs the best.
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