Peer-to-Peer lending and how it works.

Getting loans for the purposes of business has never been easy what with the stringent rules and guidelines laid down by the banks. Over the years there has been innovations that has brought about a respite in that industry and one of such is Peer to Peer lending or person-to-person lending.

---

What then is Peer-to-Peer lending?

Peer-to-peer lending is a method of lending money without having to go through the traditional loan application process of the banks or financial institutions.
Pros and cons.

• The benefit of this type of lending is that it has a lower interest rate.
• The disadvantage however is that it has an inherent risk for the lenders and borrowers.

---

Getting a fair deal is dependent on some conditions and these tips will help.

• Be Cautious.- Various lenders have different conditions and getting to understand how they operate in terms of interest rates and repayment periods. These loans may however not be guaranteed, but it is better to get on the cautious side.

Consider the risk taking ratio. When getting a loan, get the complete works of the borrower before proceeding.
Evaluate the borrower. It is very important that you have an understanding of the criteria of the borrower so that you do not get sidelined in the process of being.
Seek to have a guaranteed loan.As a lender, get into an agreement that will ensure that you get money back and will not loose out if the borrower defaults. Make sure the loan is backed by a corporation or credit union.

---

• Borrow responsibly.- It is important that you borrow responsibly. Take what you really need so that you can be able to make payments when its time for repayment.
  Many default in their repayment and that is mostly as a result of their borrowing more than is need.

Make sure to get into business with the right parties. This is very important so you are at a comfortable enough place to be able to make the right decisions and not be pressured into accepting unrealistic conditions.
When you are applying for a loan, make sure to provide your information as accurately as possible so it is easy to get you matched with the right lenders.

---

Lending can be hard and getting the right lender can be very difficult and sometimes impossible. Being able to understand how this work is essential to getting approved and then being able to return as a happy person who has used the P2P service.

Image: startuphyderabad.com and onlinemarketinghits.com
Additional info. wikipedia.org