How Exactly Does Peer to Peer Lending Work

Peer to peer lending isn’t a new concept, but with the advent of the internet, it’s become much more mainstream than it was in the past. Just as robo investors like Betterment made investing more widely available, peer lenders made two things available to a broader audience.

Banks make money, lots of it. What is their primary source of revenue?

For most banks, loans are the primary use of their funds and the principal way in which they earn income. Consumer lending makes up the bulk of North American bank lending, and of this, residential mortgages make up by far the largest share.

Peer to Peer lending lets us little people get in on this very lucrative business.

The second thing peer to peer lending allows for consumers to have an alternate place to borrow money than a bank. This has been especially important for consumers whom banks won’t touch for one reason or another.

Banks don’t make money by taking risks when it comes to loaning money, but a risky borrower is not necessarily a dead beat borrower.

If you want to get in on this whole banking thing and start loaning money, or you want to borrow money but can’t or won’t deal with banks, we’ll detail everything you need to know to make peer loans and to become a peer borrower. Because peer to peer lending is an excellent way for individual investors to make money and borrowers to save money.

So what exactly is peer to peer lending? P2P lending connects regular people who want to lend money to ordinary people who want to borrow money, neatly cutting banks out of the equation. The platform where these two groups connect is called peer lending platforms and are found online; they don’t have brick and mortar locations

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