Peer-to-peer lending, also known as peer to peer (P2P), is an online financing system through which individuals can borrow or extend credit to other individuals.
Both lenders and borrowers can benefit from this alternative loan system which offers many advantages over traditional bank lending.
How does a loan between individuals work?
The loan between individuals is based on a relatively simple mechanism, peer to peer lending involves little risk. It will consist for private or legal persons to request loans from other individuals via crowdlending platforms, without resorting to a bank. It brings together 3 main players, each with a well-defined role:
- Borrowers who apply for loans / credits will submit their projects via an approved P2P platform specifying the desired loan amount.
- Lenders regularly registered on the platform can access projects / loan requests. They will select those in which they wish to invest and set the conditions (amount, interest rate, amortization period, etc.).
- The crowdfunding platform acts as an intermediary between lenders and borrowers. It ensures the provision of funds collected by lenders to the borrower. It assesses the solvency of the latter and provides investors with all the information relating to the projects as well as their risks.
What are the advantages of this type of loan?
Its advantages are certain, both for lenders and borrowers, on different platforms such as Mintos. For investor lenders, the main benefit is the returns they earn from the remuneration of their loans. This makes it an ideal way to create regular additional income depending on the loan amortization period.
For the borrower, P2P very often represents the best alternative to access financing without turning to banks. A guarantee (mortgage / surety) is not always required and you have great flexibility in the use of the amounts borrowed.
How to subscribe to a loan between individuals?
It is relatively simple to take out a loan between individuals. To do this, you must go to a legal and reliable crowdfunding platform.
As access to the platforms is regulated, you must necessarily meet the eligibility conditions which may vary from one platform to another. Once your account is created and verified, you can submit your loan request on the platform. A subscription campaign will be opened to collect funds from investors who are members of the platform.
At the end of the subscription campaign and when the desired amount is reached, the funds are made available to you after acceptance of the conditions and signature of the loan contract.