Peer-to-Peer (P2P) Finance

Find an overview of information, news and links regarding Peer-to-Peer (P2P) Finance.

P2P Finance
P2P Finance = generally refers to person to person lending without the intervention of banks.

Description

"P2P lending is a new application for P2P services and technology. It directly connects and provides benefits to individual lenders and borrowers. P2P lending bypasses banks and other formal financial institution. It's often called Social Lending, since part of its appeal is the person to person nature of the service.
P2P lending services are not financial institutions. They do not guarantee loans or rates. They are an exchange or intermediary that facilitates the matching of lenders and borrowers and the transfer of funds and payments.
The service may include social networking features, such as photos, borrower Q&A, friends, borrower recommendations, community groups, and listing sharing. Loans are generally small, typically $1,000 to $25,000 and spread out over many lenders who can loan as little as $25."

How it Works

P2P Lending
Peer-to-peer lending is a means by which borrowers and lenders may transact business without the traditional intermediaries, such as banks. It can also be known as Social Lending. An enabling technology for peer-to-peer lending has been the internet, where peer-to-peer lending appears in two primary variations: an "online marketplace" model and a "family and friend" model.
The marketplace model of peer-to-peer lending on the internet enables peer lenders to locate peer borrowers and vice-versa. This model connects borrowers with lenders through an auction-like process in which the lender willing to provide the lowest interest rate "wins" the borrower's loan. The marketplace process may include other intermediaries who package and resell the loans, but the loans are ultimately sold to individuals or pools of individuals.
The "family and friend" model foregoes the auction-like process entirely and concentrates on borrowers and lenders who already know each other, as with two friends or business colleagues formalizing a personal loan. Whereas the primary benefit of the marketplace model is the "match making" aspect, the family and friend model emphasizes online collaboration, loan formalization and servicing.