An Introduction to p2p lending

by Samuel
4 min read

What is p2p lending?

So briefly, what is p2p lending about? We like to phrase it like this:

As a p2p investor, you are the bank.

Lenders will borrow money from your investments. On p2p marketplaces (also called “platforms”), you can directly invest in credits of borrowers. Contrary to many other forms of investments, returns are high and go beyond 10% of annual interest.

Here is a comparison between traditional money lending and peer-to-peer lending:

Before continuing, let’s clearly pin down what we are talking about.

What is the meaning of p2p lending?

Within the community, the following terms are used rather interchangeably:

  • peer-to-peer lending
  • peer-to-peer investments
  • peer-to-peer credits
  • peer-to-peer loans

Less frequently, the p2p industry is also categorized as:

  • private-to-private lending
  • crowd investing

As beyondp2p we primarily talk about p2p lending from an investing perspective. We do that, because we want to help investors.

In general terms, when summing up the essence of the investor’s domain, we can say that

peer-to-peer investments is a credit business where peers act as borrowers and lenders alike.

What are peers?

Well, people like you and me. Private individuals investing in the debt of private individuals.

peer-to-peer, and even more specific private-to-private, signifies that – seemingly – there are no intermediaries that are liquidating the transactions of the marketplace. (We will argue later that in our eyes this so-called “disintermediation” of the lending business due to p2p is not correct in its totality.)

As private investor, you have the opportunity to invest in a great deal of loans or investment types:

  • consumer loans
  • businesses
  • real estate
  • luxury assets
  • cars

As it has been said: Borrowers will be most likely private individuals as well. Yet, there may be some exceptions. Sometimes the borders are blurred to crowd investing where you not necessarily invest in private individuals, but associations or societies. That depends primarily on the concrete platform where you are investing. For example, you may invest in real estate projects where there are multiple borrowers.

  • What is p2p investment?
  • Which basics should I learn?
  • What does all these jargon mean?
  • What are common risks when investing in p2p loans?
  • How to mitigate these risks?
  • Which platforms should I consider?
  • How to get invested?

The objective of this guide is to answer these questions. beyondp2p helps first-time investors to learn everything they need to know to get invested. But also, so our hope is, to provide advanced readers with more profound knowledge on the subject-matter.

Next chapter: 5 steps to start investing into p2p loans

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