How it works?
Peer to Peer lending platforms use state of the art computer systems and internet technology to provide a win-win solution for borrowers and savers.
Savers can earn high rates of interest by doing what banks do – lending money to credit worthy consumers and businesses. Borrowers have an alternative source of financing and can get better terms from P2P lenders than from banks.
Borrowers apply to P2P lending platforms for loans just like at a bank or finance company.
P2P platforms use many of the same tools and techniques that banks use to evaluate each loan application. Borrowers that are not considered to be credit worthy are rejected.
Each loan is assigned a credit rating. Borrowers with higher ratings pay a lower rate of interest and borrowers with lower ratings pay a higher rate of interest.
Each loan is divided into many small pieces, just like a bond issue. So one borrower actually borrows from many savers.
Savers can lend small amounts to many borrowers and build diversified portfolios of P2P loans that match their risk tolerance, investment horizon and interest rate requirement.