Lending between individuals or peer to peer (P2P) is a loan system allowing individuals to lend or borrow money to other individuals via crowdlending platforms.
It is an alternative financing method with a simple operating principle and popular for its many advantages.
How a P2P loan works
This type of loan is for people wishing to borrow credit without referring to a traditional credit institution. It is therefore a loan system without banking intermediation. Its mechanism is relatively simple.
Rather than going to a traditional credit organization, individuals or businesses will turn to private lenders to obtain the loans they need. The crowdlending platform acts as a market intermediary for bringing lenders and borrowers together.
Lenders are free to invest in the projects of their choice by setting the loan criteria (amount, interest rate, amortization period). The borrower who receives the funds agrees under contract to repay the loan with interest due at the agreed maturity.
What are the different forms of loan between individuals possible?
The P2P loan extends practically to all forms of loans or credits. Peer to peer borrowers can, for example, request and obtain:
- Personal loans
- Loans for works
- Consumer credit
- Agricultural credits
- Professional or business loans
- Real estate loans
- Auto loans
- Renewable credits
Note that the above list of loan forms is not exhaustive. In addition, some P2P platforms may choose to operate in one or more types of loans at the same time. With a minimum of research, you will be able to find the site offering the right form of loan for your needs.
What are the advantages of a loan between individuals?
P2P lending has many advantages, both for borrowers and lenders as well as for the crowdlending platforms through which it is carried out. For the lender, the advantage of this type of loan lies in the high return it offers, i.e. 6 to 12% gross annual return depending on the platforms on which you are affiliated.
For borrowers (companies, professionals, individuals) P2P offers an alternative solution to obtain loans under more flexible conditions than those imposed by traditional credit organizations. The loans can be obtained in a relatively short time following criteria that can be negotiated with the lenders.
The platforms themselves are not left out. They are for-profit companies and charge fees on the various loans made through their online platform.
How to choose an organization for a loan between individuals?
Above all, you must ensure that the platform, French or foreign, is perfectly legal and reliable. In France, the platforms (IFP, CIP and PSI) must obtain approval from the ACPR and the AMF in order to operate legally.
You must then take into account the guarantees offered by the site to limit your risk of capital loss. Other details to consider finally concern the transparency of the fees applied by the platform, the types of loans granted and the investment functionalities.