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Peer to Peer (P2P) Lending

Here’s a new way to consolidate your debt.  Peer-to-peer lending is the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers. Since the peer-to-peer lending companies offering these services operate axsmith-law-debt-relief-peer-2-peer-loansentirely online, they can run with lower overhead and provide the service more cheaply than traditional financial institutions. As a result, lenders often earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates, even after the P2P lending company has taken a fee for providing the match-making platform and credit checking the borrower.

Peer to peer lending won’t be an answer to all loan needs.  It may make sense to use a credit card with 0% interest for the first year, if you know that you will be able to pay it off. Peer-2-peer loans charge fees that may make no sense to pay if you can get the money a cheaper way.

More positive news:

The peer-to-peer lending industry has seen exponential growth in its 10 years. Last year saw a 106% increase in lent funds from Q3 2014 to Q3 2015 (UK P2P market) and with an expected industry value of almost £5bn in 2016 it could be a great opportunity for you to start increasing the returns you make on your capital.

“Crowd sourced” Loans

Another option is “crowd sourced” loans.  These loans are posted on a website and lenders offer to loan you part or all of the money you ask for.  It is one way to completely avoid banks and credit card companies.

Lavaro went to the online site for Lending Club Corp. and posted his request for a three-year, $12,000 loan with a fixed annual percentage rate of around 11 percent. Then he watched as more than 60 anonymous investors snapped up slices of his loan in pieces as small as $25.


Risks of P2P Loans

Of course, it is risky for the people making the loans, but it is an option for people who want to make a better return on investment than bonds or savings accounts.

Increasingly, peer-to-peer lenders are lending billions of dollars to marginal borrowers with little verification that the borrowers are who they purport to be. But that hasn’t stopped peer-to-peer marketplaces from finding investors willing to buy packages of loans they originate.

Peer-to-peer lending sounds like a crowdfunding thing, but for profit.

P2P Lending in China

But not so popular in the East.  China calls P2P lending a “complete Ponzi Scheme” and a threat to the entire economy.  This attitude has resulted in 21 arrests and the closing of P2P websites.

It’s estimated that P2P lending in China has grown by over $150bn in one single year. In 2014, lenders dished out Rmb253bn, increasing that number by a further Rmb982bn in 2015.

Banks and P2P Lending

Not to spoil a surprise, but the banks have sneaked in ANYWAY.  Now the majority of loans are given by institutional investors.  The high return on investment is appealing to them, as is the highly predictable credit performance across a large portfolio of loans.

If you need help with debt relief, bankruptcy, or debt settlement, phone Axsmith Law LLC at (202) 285-5415.

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