Peer-to-peer financing, or P2P financing, shot to popularity within the mid-2000s at any given time whenever numerous borrowers were growing frustrated with mainstream finance institutions’ dominance regarding the loan process. Unlike more conventional financing methods, P2P financing offers the possibility greater returns for investors and reduced interest levels for borrowers, each of which may have assisted get this alternative means of lending ever more popular.
The prosperity of Lending Club and Prosper, P2P lending platforms that pair up borrowers with investors, has additionally bolstered the development of P2P financing. Lending Club were only available in 2007 making loans well worth $3.5 million in its very first 12 months. That figure has since grown to $3.4 billion. While this explosive development implies that numerous investors think P2P financing is a completely safe option to more conventional types of investing, you will find undeniable dangers.