Peer-to-peer (P2P) lending is a method of debt financing that enables individuals to borrow and lend money without the use of an official financial institution as an intermediary. Peer-to-peer lending removes the middleman from the process, but it also involves more time, effort and risk than the general brick-and-mortar lending scenarios. P2P lending is also known as social lending or crowdlending
Traditionally, individuals and small businesses who want a loan usually apply for one through the bank. The bank would run extensive financial checks on the applicant’s credit history to determine if the entity would qualify for a loan and if yes, determines the interest rate that will be charged on the loan. Individuals that want to avoid being charged high interest rates or that would otherwise be rejected for a loan application due to poor credit history, may opt for an alternative way of borrowing funds – peer-to-peer lending.
With peer-to-peer lending, borrowers take loans from individual investors who are willing to lend their own money for an agreed interest rate. The profile of a borrower is usually displayed on a peer-to-peer online platform where investors can assess these profiles to determine whether they would want to risk lending money to a borrower. A borrower might receive the full loan amount or only a portion of what he asked for from an investor. In the case of the latter, the remaining portion of the loan may be funded by one or more investors in the peer lending marketplace. In peer-to-peer lending, a loan may have multiple sources and monthly repayment has to be made to each of the individual sources.
Today there are many platforms that allow you to get profits around 10%