Traditional lending and borrowing methods have approached new heights with the  accessibility of Peer-to-Peer Lending (also known as Person-to-Person Lending). There has been this type of lending going on for centuries, primarily in ethnic communities and immigration groups. They have long been operating their own networks of lending between fellow members. Nowadays, there are peer-to-peer lenders that are taking advantage of the Internet, bringing their technology to a much more vast group of people. Companies like Prosper and the Lending Club are two of the more popular online providers of Peer-to-Peer Lending.

How Does Peer Lending Work?
The principle is relatively straightforward, though the specifics may differ somewhat between the varying providers offering these types of loans. A prospective borrower arranges a statement as to what their needs are and why. Their income, credit history, and other pertinent information are submitted to the facilitating party, the organization that acts as the middle-man for the lenders and borrowers by processing the monetary transactions. There is an authentication procedure to determine the legitimacy of the submitted information.

Once all of the borrower's info is confirmed, their loan request is posted on the site, as well as the info needed for lenders to turn out a decision. The info that is listed publicly does not include any private or personally identifying information. More specifically, no information that can be used for stealing one's identity is ever posted publicly.

Would-be lenders will browse loan requests and select to offer financing or not. There is a bidding process involved, during which lenders offer to grant the loan at a particular interest rate. It is very common for multiple lenders to be involved with one loan. Meaning, the entire loan amount is split up between more than one lender, but all offering the same interest rate.

Peer Lending are usually loans that are short-term loans for smaller amounts; typically up-to three years for amounts up to $10,000. The most common loan purposes are for new business and the consolidation of debt.

The companies that act as the providers make their money via a fee they charge for the loan processing as well as costs for tasks that are needed in order to make their programs work, i.e. listing the loan, registering as a lender. The actual lenders will earn profit via the interest on the loans that they are providing. Learn more about becoming a lender of person-to-person loans. The interest rates associated with this type of lending are typically higher than those offered by traditional lending sources but the ability to get a loan if you are a person with bad credit is more possible than if you were to apply with your credit union or bank. Also, peer lending in general is much less sticky than borrowing from family. Get more info about family loans.

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