Peer to peer lending or P2P financing is defined by Wikipedia as"the practice of lending money to unrelated people, or"peers", without going via a classic fiscal intermediary such as a bank or other conventional financial institution". As the definition indicates, it's an alternate kind of financing in which folks contribute to individuals.
A P2P lending trade would entail a willing lender along with a ready loan seeker (the debtor ) who agrees on particular conditions including Interest Rate, length, etc.. A loan seeker might have many motives to avail of a P2P loan as opposed to a conventional loan.
Here are a few best practices through to get good P2P investment:
A. Flexibility in determining prices, durations, little loan amounts
B. Lack of rigorous norms and paperwork
D. Quick execution in the event of emergency requirements
A creditor would mostly consider P2P financing for two fundamental motives:
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For a creditor, P2P lending is a quasi-fixed investment instrument in the sense that it supplies a predetermined rate of return (a creditor negotiates with the loan seeker), but one which is considerably higher than a fixed deposit but he/she takes up a danger that's greater than a Bank FD or a posted bail bond.
Prior to the arrival of those P2P platforms, folks would take short-term interest-free loans from folks that have been directly or indirectly understanding to them. This situation had its constraints to both loan seekers in a type of societal stigma, requiring a favor, short-term durations, etc and also for creditors in form of absence of legal arrangement, absence of yields, etc.